Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

Oral Answers to Questions — TECHNOLOGY

Clyde Shipbuilding Industry

Mr. Gordon Campbell: asked the Minister of Technology if he will make a statement on the shipbuilding industry on the Clyde.

Mr. Edward M. Taylor: asked the Minister of Technology whether he has now concluded his discussions with the Shipbuilding Industry Board on the position of the Clyde shipyards.

Mr. Rankin: asked the Minister of Technology if he will make a statement on the future of the shipbuilding industry on the Upper Clydeside.

Mr. William Hamilton: asked the Minister of Technology if he will now make a statement on the future of the Upper Clyde shipyards.

Mr. Shinwell: asked the Minister of Technology what progress has been made in solving the problems that face the shipbuilding industry on the upper Clyde; and if he will make a statement.

The Minister of Technology (Mr. Anthony Wedgwood Benn): The Shipbuilding Industry Board is awaiting proposals from Upper Clyde Shipbuilders Limited which are expected within the next few days.

Mr. Campbell: When will the Minister be able to make a statement? Will it be before the recess? In view of the Government's involvement in this consortium, is the right hon. Gentleman treating as urgent and important the need for

a healthy and viable industry on the Clyde, and does he recognise that this is of great concern in Scotland?

Mr. Benn: As far as the latter part of the question is concerned, certainly. This is what the operation is all about. As regards the date of a further statement, I am to some extent in the hands of the U.C.S. and the S.I.B. which will want to look at it, but I shall keep the House as fully informed as I can.

Mr. Taylor: Is the Minister aware that workers on Clydeside are ready and willing to work themselves out of this crisis so long as they know the size and extent of the problem? Will he therefore ensure that when the plan comes forward the men are told the precise targets which have to be met if the yards are to be saved, so that they can meet them?

Mr. Benn: I am aware of the interest and concern of the people working in Upper Clyde Shipbuilders. It is a matter not just of telling the workers but of involving all those concerned in the problem of tackling this very serious situation.

Mr. Rankin: Will my right hon. Friend keep before him the fact that on Clydeside today there are plenty of men to build ships, and ships are waiting there to be built? Will he see to it that he does everything he can to assist in keeping those two together?

Mr. Benn: I am well aware of that point, but my hon. Friend will recognise that the operation of U.C.S., like every other company, is to build ships in such a way as to provide a return. When I look at the money which has been made available by loans, and also money in grants, coupled with the £.19½ million in loans which was made available to Cunard for building the QE2, and £1 million a year on R.E.P. made available to U.C.S., I have no doubt that the Government have indicated their interest in this matter in a substantial way.

Mr. Hamilton: Can my right hon. Friend give an assurance that satisfactory guarantees have been given, or are likely to be given by U.C.S. as to productivity, a reduction of unofficial strikes, a reduction of absenteeism, and improvement in management before public money is involved?

Mr. Benn: My most recent visits have been very much concerned with that, particularly in view of the current losses confronting the group. This, I think, is now understood, and the responsibility rests upon management and the trade unions on the Clyde to tackle it in that spirit.

Mr. Shinwell: Is there not a danger that unless the S.I.B. makes recommendations of a substantial character very soon, some elements in the consortium may decide to hive off and associate themselves with other sections of the industry, and thus create a great deal of unemployment in the remaining shipyards of the consortium?

Mr. Benn: My right hon. Friend is not quite right about a consortium. It is a group, and we are dealing with the group as a group. My right hon. Friend is perfectly right in saying that time is of the essence here, and that is why the S.I.B. is anxious to receive the plans from U.C.S.

Mr. Galbraith: While fully agreeing with the Minister that eventually this organisation must make a profit, may I ask whether he thinks that as he was responsible for the shotgun marriage which created the U.C.S. he has some responsibility to see that there is a sufficient dowry to make the marriage workable?

Mr. Benn: I was responsible under the Shipbuilding Industry Act for approving the recommendation of the S.I.B. in this respect, but it is manifestly clear to anyone who looks at it that without the Board or the Shipbuilding Industry Act or the Industrial Expansion Act which provided money for the 0E2 there would have been a major tragedy on the Clyde much earlier than now, and it should be seen in that way. We have made substantial help available, but we have to look at this in terms of future prospects for the group.

Mr. Small: I thank my right hon. Friend for his reply and I know that he monitors the Upper Clyde group. Does he recognise that it is an integral part of the British shipbuilding industry and that some of the historical factors should be taken into account in any allocation or recommendation of the S.I.B.?

Mr. Benn: The House recognises, and did so when the Act was passed, that the inheritance, not just on the Upper Clyde but in the whole shipbuilding industry, was one of the problems which had to be overcome. It required a new type of management, a new approach by management and a new sense of responsibility by the workers involved. It would be a great mistake, because of the problems of this group, to forget the successes of other shipbuilding groups, all of which of course, have received, or are eligible to receive, substantial Government help.

Mr. William Hamilton: asked the Minister of Technology how much public money has been invested in the Clyde shipyards since October 1964; and how much was so invested in the comparable period prior to that date.

The Joint Parliamentary Secretary to the Ministry of Technology (Mr. Gerald Fowler): The Government own 875,000 £1 shares in Upper Clyde Shipbuilders Ltd., and £940,000 of 7 per cent. loan stock in its Fairfield subsidiary. The Shipbuilding Industry Board has made grants of over £3 million and loans of over £4½ million to the same company. All these investments have been made since October, 1964. These sums do not take account of any payments to Clyde shipyards under the Local Employment or Industrial Development Acts.

Mr. Hamilton: How much of this was due to the Industrial Expansion Act, 1968, which the Opposition are pledged to repeal? Can my hon. Friend say what these figures represent in terms of total grants and loans given to all shipyards in the United Kingdom?

Mr. Fowler: In answer to the last part of my hon. Friend's supplementary question, I must ask him to await the annual report of the Shipbuilding Industry Board. It is now familiar to the House that we cannot easily reveal the details of loans and grants made by the board in advance of its report.
The answer to the first part, about the Industrial Expansion Act, is that we should have been unable to give as much help to the industry as we are giving if we had not secured that Act, with the consent of Parliament.

Mrs. Ewing: What is the rate of interest on the loan and what terms of repayment have been arranged? How do


these figures compare with loans made prior to 1964?

Mr. Fowler: I cannot, without notice, reveal the rate of interest on the loan. In any event, the details are very much a confidential matter in the transaction between the Shipbuilding Industry Board and the company concerned. I hope that hon. Members will not press me to give details in this matter—[HON. MEMBERS: "Why not?"]—because if they did they would only make a difficult matter even more difficult.

Mr. David Price: Would not the hon. Gentleman agree that it has been the practice of the S.I.B., as we saw in its first annual report, to give just the details for which the hon. Lady the Member for Hamilton (Mrs. Ewing) has asked? Are we not entitled to assume that in its next annual report the S.I.B. will continue with what most of us regard as the admirable practice begun in its first report, of giving the very details for which the hon. Member for Fife, West (Mr. William Hamilton) has asked?

Mr. Fowler: I appreciate that, but the hon. Gentleman must accept that there is a crucial difference between awaiting the annual report of the S.I.B., in which it accounts for its actions over the past year, and revealing in public the details of commercial transactions as they take place. To do that would make the position of a particular company in the commercial sense very difficult indeed, and that is why I cannot reveal the details.

Mr. Ridley: asked the Minister of Technology if he will seek to make arrangements whereby the shipyards constituting Upper Clyde Shipbuilders Limited can withdraw from that consortium.

Mr. Benn: Upper Clyde Shipbuilders Limited is not a consortium but itself owns all but one of the shipbuilding yards in the area. The question of these yards withdrawing from the company does not arise. In the case of the other yard, Upper Clyde Shipbuilders has a majority holding in the company owning it and the relationship between the companies is a matter for them.

Mr. Ridley: Does the right hon. Gentleman now rue the day when he

pushed all these companies together? Has he yet realised that it is sometimes better to leave things to the free play of the market?

Mr. Benn: Had we left the shipbuilding industry to the free play of the market we should not now have a British shipbuilding industry with more orders on its books than there have been at any time. The hon. Gentleman is, therefore, totally wrong. If he is talking about help to the shipbuilding industry, I hope that he will also look at the other groups which have received help or are eligible for it and which, as a result, have been able to create for themselves a viable position which will benefit our balance of payments, create employment and provide a new lease of life for the shipbuilding industry.

Mr. Rankin: Is my right hon. Friend aware that if it had not been for the direct intervention of the Labour Government in 1964 there would, other than at Yarrows, have been no shipbuilding at all on Upper Clydeside?

Mr. Benn: I am very well aware of the problems facing the Upper Clyde. To give another example, if the Government had not taken action in respect of Furness in the North-East of England there would have been major unemployment, and a wonderfully equipped yard would have gone out of the industry at a time when its facilities were needed.

Atomic Weapons Research Establishment (Orfordness, Suffolk)

Sir H. Harrison: asked the Minister of Technology whether he will make a statement about the future of the Atomic Weapons Research Establishment at Orfordness, Suffolk.

The Minister of State, Ministry of Technology (Mr. J. P. W. Mallalieu): In the foreseeable future there is not likely to be an adequate work load to justify keeping the Orfordness station open. The Atomic Energy Authority is therefore studying the implications of closing the establishment and transferring to Aldermaston those test facilities which will continue to be required.

Sir H. Harrison: Why have we had to wait for this Question before we had a statement about this? There have


been rumours in the Press. Surely this is a bad way of doing it. What steps is the hon. Gentleman taking to see that those employed here are given further occupation? Is his decision influenced by the building of the radar research station at Orfordness?

Mr. Mallalieu: On the latter question, the answer is, "No" An announcement has been made to the staff concerned that this prospect is before us. There are about 170, most of whom could be re-employed at Aldermaston, if they want it, or, otherwise, in establishments in the area itself.

Clyde Shipyards (Orders)

Mr. Edward M. Taylor: asked the Minister of Technology if he will make a statement on the present order book of Clyde shipyards.

Mr. Fowler: At the end of last month the various shipbuilding companies on the Upper and Lower Clyde had ships to the value of over £80 million under construction and ships to the value of nearly £70 million on order but not yet started.

Mr. Taylor: Would the hon. Gentleman agree that this is a substantial order book? Does he intend that the completion of this work will be an integral part of any plan for the future of U.C.S.?

Mr. Fowler: It is indeed a substantial order book. As for the completion of work which is already on hand in the yards of U.C.S., I trust that the hon. Gentleman will not take so depressed a view of the future of U.C.S. as to assume that it would be necessary to make any special arrangements for this.

Mr. Manuel: Is my hon. Friend aware that, despite this substantial order book, it is of supreme importance that any discussions to give success to these orders should include talks with trade union representatives on an equal footing with employers' organisations?

Mr. Fowler: I agree entirely. My right hon. Friend and I have said repeatedly to all concerned that any solution to the problems facing the Upper Clyde must be found through joint effort by management and workpeople and their organisations.

Mr. David Price: Could the hon. Gentleman break down the figures which he has given between the Upper Clyde and the Lower Clyde?

Mr. Fowler: I apologise to the hon. Gentleman but I cannot do that. The figures are supplied in confidence and it would be improper to reveal the order books of individual companies.

Blue Streak

Mr. Marten: asked the Minister of Technology if he will make a statement about the future of Blue Streak.

Mr. J. P. W. Mallalieu: The European Launcher Development Organisation is considering its future launcher development and production programmes, including the number and type of vehicles required. Until a decision is reached, within the next few months, requirements for Blue Streak beyond the present programme will not be known. The Government have already informed Member States that they undertake to supply Blue Streak launchers at least up to 1976 on a commercial basis, provided that the orders are placed in time.

Mr. Marten: Is it true that E.L.D.O. will probably want about two a year? If so, will development work continue on Blue Streak?

Mr. Mallalieu: I cannot say how many E.L.D.O. will want beyond the remaining four, until it makes up its mind, which will be in September. In the meantime, development work is proceeding.

Black Arrow Programme

Mr. Marten: asked the Minister of Technology if he will make a statement about the Black Arrow programme.

Mr. J. P. W. Mallalieu: The Black Arrow programme is essentially a programme of research and development on satellite technology. The first test firing of the launcher is planned for June of this year, and the first utilisation satellite is planned for launch in 1971.

Mr. Marten: What is now the Government's end purpose for this programme?

Mr. Mallalieu: The end purpose is to take part in space activities and work on satellites which are likely to be profitable.

Sea Water (Desalination)

Sir D. Renton: asked the Minister of Technology what progress has been made with regard to desalination of sea water; which pilot schemes are in operation or have been planned; and whether he will make a statement.

Mr. J. P. W. Mallalieu: Considerable progress has been made by the Atomic Energy Authority and several industrial partners. Development of the multi-stage flash distillation process for export markets has consistently reduced costs, and other processes are under investigation.
Pilot plants exist or are planned to test these alternative processes, but there are no proposals at present for desalination schemes in the United Kingdom.

Sir D. Renton: In view of the suggestions in the House in recent years that there should be pilot schemes in connection with atomic energy power stations, why are no pilot schemes actually operating? What will the hon. Gentleman do about that?

Mr. Mallalieu: Pilot schemes are operated. I am talking about schemes for desalination plants to supply the United Kingdom. A considerable investigation has been done into that, and the Minister of Housing is at present considering it.

Miss Quennell: Is the hon. Gentleman aware that there is a predictable and foreseeable water shortage in this country, which, by the year 2,000, will be critical? Surely the Government should be doing a little more than this about it.

Mr. Mallalieu: This is a matter for the Minister of Housing, but he has been having a report prepared on it and it is now being considered.

Concorde Aircraft

Mr. Biffen: asked the Minister of Technology what additional data have emerged following the recent test flights of Concorde to determine whether or not there will be sufficient commercial demand to enable a repayment of a substantial element of publicly financed development costs by means of a levy on individual aircraft sales.

Mr. J. P. W. Mallalieu: The early test flights which have been at subsonic

speeds have been encouraging. The demand for Concorde will, however, depend on the performance of the aircraft at its sustained supersonic cruising speed, which is not expected to be reached until the first half of 1970.

Mr. Biffen: Does it remain the Government's expectation that a substantial—I emphasise the word "substantial"—amount of the development costs will be recouped by the taxpayer, as these have been publicly financed?

Mr. Mallalieu: We shall not be able to tell that until we know what orders will come on, but the House has already been told that we should hope to recoup about a third of the development costs.

Mr. Onslow: asked the Minister of Technology what estimate he has made of the effect on Concorde sales prospects of the United States Government's decision not to back the manufacture of a United States supersonic civil transport aircraft.

Mr. J. P. W. Mallalieu: No such decision has been taken. The United States Administration is still considering whether or not to proceed with the development of a supersonic transport.

Mr. Onslow: Would the hon. Gentleman agree that the indications are that a decision to proceed is unlikely in the near future and that, meanwhile, since we enjoy a considerable lead over the possible competition, it would be a false economy—all other things being equal—to allow the pace of our own endeavours to slacken?

Mr. Mallalieu: There are no indications yet available about the American attitude, but I agree that our present lead is very useful.

Mr. Fortescue: asked the Minister of Technology whether he will make a further statement about Concorde.

Mr. Michael McNair-Wilson: asked the Minister of Technology what recent discussions he has had with the French authorities about progress with the Concorde project; and if he will make a statement.

Mr. Rankin: asked the Minister of Technology if he will make a statement on the progress of Concorde.

Mr. Brooks: asked the Minister of Technology what financial limit Her Majesty's Government have laid down beyond which they will not be prepared to support the research and development programme of the Concorde.

Mr. Benn: I apologise for the length of this Answer.
The results of the early flights have been encouraging.
The official estimates, published in 1966, of the costs to the two Governments of the joint extra-mural development programme comprised a basic estimate of £450 million plus an overall contingency of £50 million.
The latest basic estimate, calculated on the same price level, is £600 million. After allowing for the effects of devaluation and of pay and price increases in both countries, this becomes £730 million. This increase is obviously a matter of serious concern and is one of the points we and the French Government will be considering when examining the future of the project.
There are still many uncertainties to be resolved. The basic estimate of £730 million does not include a contingency allowance for major unforeseeable difficulties; measures to overcome such difficulties, if approved, would involve higher expenditure. If further changes involving anything more than a 15 per cent. increase in the estimates were proposed, we should probably be facing a demand for a fundamental redesign of the aircraft. I shall circulate further particulars in the OFFICIAL REPORT.
My talks with the French Minister responsible, which will include all financial questions, have had to be postponed until after the French Presidential Elections.

Mr. Fortescue: I thank the Minister for his frank statement of the present position. Will he once again reassure the House that up to now all the flight testing has been highly successful—perhaps even more than we hoped—and that if all goes along these lines the full details of these test performances will be with the airlines by the middle of next year, and that we may expect orders for several hundred aircraft to be placed by the end of next year, with an in-service date for the first of, perhaps, 1973?

Mr. Benn: In view of the experience that we have had with advanced aircraft it would be foolish of me to confirm in detail a timetable of the kind put forward by the hon. Member but, as I have made clear on a number of occasions, this period of flight testing is a period of decision for Concorde and ultimately Concorde's future will be decided by airline orders. I cannot go beyond what has been said about the encouraging nature of the flight tests because the evaluation of data naturally takes some time.

Mr. Michael McNair-Wilson: Can the right hon. Gentleman say whether there is any truth in the statement that the French are intending to spread some of the Concorde finance to cover the A300B airbus?

Mr. Benn: That is a matter for the French Minister. It is not for me to comment upon the deployment of French resources.

Mr. Rankin: In view of the fact that the figures which have just been given us by the Minister have been fairly widely expected, and in view of the fact that we have advanced so far in the creation of this aircraft, would it not be a very unwise action to think about turning back or abandoning it, or even proposing to proceed with it on less magnificent lines?

Mr. Benn: I think that the answer to my hon. Friend is that this aircraft has always involved great technological and economic uncertainty. As the Minister responsible in this country for advising the Government on the deployment of these gigantic sums of public money, I am bound to look at it in terms of the return. The House knows me well enough now to know that I try to apply this in the case of the A300, E.L.D.O. or any other project for which I am responsible. That is the only way we can do it.

Mr. Brooks: Is my right hon. Friend aware that he has not answered my Question No. 42? It would be interesting to know whether there is any limit whatsoever to Her Majesty's Government's commitments. Will he indicate whether, if the 15 per cent.—plus extra expenditure is incurred, and we go into a redesign phase, it will still mean that neither this country nor France will have an opportunity to withdraw?

Mr. Benn: I think that I did answer that question, because I said that measures to overcome such difficulties—that is, above the basic commitment—if approved, would involve much higher expenditure. I also made clear in my answer that, as in all other matters, the subject of my hon. Friend's question is discussed with the French Government.

Mr. Corfield: Will the right hon. Gentleman refer again to the question asked by my hon. Friend the Member for Walthamstow, East (Mr. Michael McNair-Wilson)? It is clear that the suggestion that the French will go slow could have a considerable effect on the continuity of employment in the various factories in this country which are concerned with Concorde. Can the right hon. Gentleman give us some idea of the way in which this extra money will be spread, on an annual basis? It will obviously not be required in a lump sum. Can he give us some idea of the spread per annum?

Mr. Benn: On the hon. Member's first point, in my other capacity, as a Member for a Bristol constituency, I am concerned with the employment consequences of the development programme. At the same time, the management, in phasing the programme, is also taking account of the fact that there has been a slippage, and this is one of many important factors taken into account. As far as the latter part of the question is concerned, escalation does not mean spending more each week but that some of the problems are more formidable and require longer to solve, which, in turn, means that the total sums spent during the programme are greater. That is what the hon. Gentleman was saying.

Mr. Sheldon: Does my right hon. Friend realise that his statement will cause astonishment and dismay at the progress of this folly that we have undertaken, or that was undertaken by the previous Government without the necessary safeguards? Will he now use the opportunity afforded by the change of Government in France to take up with them the whole question of dropping this elaborate scheme and making sure that we concern ourselves only with those prospects which have a chance of becoming commercially viable?

Mr. Benn: I think that my hon. Friend has overdone his comments. This aircraft, if successful—and I should add that a great deal of effort is being put in on both sides of the Channel and in both Governments and industries to make it a success—will be substantially ahead of possible rivals, and if it meets the requirements of the airlines it will bring in substantial earnings to this country. Having said that, however, I am bound to look at it with that criterion in mind and not the criterion of simply saying that because it is advanced and sophisticated therefore we must necessarily abandon the normal criteria for the support of such projects.

Sir A. V. Harvey: I recognise the progress made with Concorde both in France and in Britain, but has the right hon. Gentleman taken into account—bearing in mind the lead that Britain has over the Americans—the possibility of our American friends going out of their way to baulk this aircraft flying over the United States on some pretext—noise, or some other technical factor—which could have a damning effect on the whole project, even if it works well?

Mr. Benn: As the hon. Gentleman knows, the design aim in terms of noise is about the same level as that of a subsonic aircraft. As for the supersonic bang, this is a matter which is bound to be considered internationally, and by countries individually. I am sure that the hon. Gentleman will not read into some very difficult community pollution problems—which is what we are talking about—any particular ill will on the part of the American Government in respect of this Anglo-French aircraft. The problems are difficult enough without attributing to others motives in this matter.

Mr. Palmer: Does my right hon. Friend agree that in any new scientific and technical field of this kind too much immediate cost-consciousness can be financial folly in the long run for the future of this country?

Mr. Benn: I can assure my hon. Friend that the problem is not a matter of immediate cost-consciousness. If I may put it starkly to the House, the question is: do the customers want this aircraft? We must consider the possibility that because of payload, range, noise, or other reasons


this or any other aircraft may not be acceptable to the market, and in that case it would not be the penny pinching attitude of the Government that would be preventing success but the fact that we have not produced something that people wish to use. These are considerations that have to be in our minds.

Following is the information:
1. The latest basic estimate of £730m. is divided as follows, as between actual past expenditure and estimated future expenditure.



British Government
French Government
Both Governments



£m.
£m.
£m.


Actual costs from 29th November, 1962 (the date of the Anglo-French Agreement) to 31st March, 1969, at the prices and exchange rates prevailing when the costs were incurred
170
160
330


Estimated costs from 1st April, 1969 to completion of the programme, at January, 1969 prices and an exchange rate of £1/11·85 F
170
230
400


Totals
340
390
730


2. The difference between the latest estimate of £730m. and the former estimate of £450m. is made up as follows:—



£m.


Latest estimate
730


Less—



additions due to devaluation of the £ in November, 1967
40


additions due to pay and price increases since January 1966 in both Britain and France
90


Latest estimate, reduced to 1966 prices
600


Increase over former estimate, at 1966 prices
150


Former estimate, at 1966 prices
450


3. Of the increase of £150m., £20m. is attributable to increases in overheads at the contractors. Of the remaining £130m., about two-thirds is attributable to design changes:—

—to meet specific new requirements proposed by the airlines and airworthiness authorities;
—to maintain the aircraft's prospects of achieving its target payload/range performance (including major modifications to the wings, fuselage, and engines);
—to improve the runway loading characteristics of the undercarriage;
—to improve the performance and reliability of various items of equipment, and
—resulting from three major exercises to reduce weight-growth.

The remainder is due to underestimation of the time and effort required to complete the programme as originally planned.

Mr. Onslow: asked the Minister of Technology what plans he has for a further series of sonic boom tests; and if he will make a statement.

Mr. J. P. W. Mallalieu: We have no plans at present for separate tests of sonic booms. Concorde's boom will be measured during the aircraft's flight test programme. The test routes on which Concorde will fly supersonically have not yet been decided.

Mr. Onslow: When such a decision is taken, will the hon. Gentleman make a statement so that people can understand precisely what is happening? Will he draw some profit from the last mismanaged series of tests, so that the new series of tests, when they come, are properly organised?

Mr. Mallalieu: We will certainly make a statement before they take place.

Mr. Younger: When studying the question of sonic booms from the Concorde point of view, will the hon. Gentleman bear in mind the outstanding qualities of Prestwick Airport for test flying, where, because it is near the sea, 'planes may be flown in and out without booms occurring over land?

Mr. Mallalieu: I am not sure about the latter part of that supplementary question, but, on the former part, I entirely agree that it is a magnificent airport.

Mr. Rankin: Would my hon. Friend at least say whether the Concorde tests will be held under terrestial or oceanic conditions?

Mr. Mallalieu: It is possible that, for safety reasons, there will be some overflying of land, but the bulk of tests will take place over the sea.

Airbus

Mr. Fortescue: asked the Minister of Technology whether he will make a statement on the progress made by the French and German Governments on the A300B airbus project and reported to him in accordance with the terms of the agreement.

Mr. Benn: There is nothing of substance to report. My Department has, of course, maintained contact with the French and German authorities.

Mr. Fortescue: Can the right hon. Gentleman confirm that Dutch and Italian interests now stand ready to participate in the A300B project? Can he tell the House the latest position about the possibility of a British designed and manufactured airbus?

Mr. Benn: I cannot answer authoritatively about Dutch and Italian interests because, not having participated following the conference in London, I am not privy to all the discussions going on between the French, and Germans and potential partners. As to the question of the possibilities of a British airbus—the BAC311—as in other projects, we are prepared to consider proposals by other aircraft manufacturers and we shall look at them very critically to be sure that if we were to go ahead with the support of such a project it would be commercially successful.

Short SC1 VTOL Aircraft

Mr. McMaster: asked the Minister of Technology what research and development work is being undertaken with the Short SC1 vertical take-off and landing aircraft.

Mr. J. P. W. Mallalieu: The prototype S.C.1. has now completed an extensive programme of research at the Royal Aircraft Establishment into basic aerodynamics, handling and performance.
The second aircraft has been fitted with an advanced control system and R.A.E. is assessing its benefits in V/STOL operations from restricted sites in all weathers.

Mr. McMaster: Will the Minister ensure that the benefits of this successful pioneering work on multi-jet vertical take-off will be maintained and exploited by the British aircraft industry and not given away to our foreign competitors to the detriment of our overseas trade?

Mr. Mallalieu: I will do my level best on that point.

Technocentres

Mr. Boston: asked the Minister of Technology if he will make a statement about his proposals for technocentres.

Mr. Fowler: I am discussing with the Council of Engineering Institutions and

local interests various suggestions for centres combining exhibition facilities and supporting activities designed to increase public awareness of the engineer's contribution to society and to attract more of our abler young people into the profession.

Mr. Boston: Does the hon. Gentleman accept that this is an imaginative concept? Where and when does he propose to start setting these up and with which local authorities and other bodies, apart from the one to which he referred, is he now having discussions?

Mr. Fowler: There have been discussions in a few places with local interests—local authorities, industry, education and so on—the purpose being to explore the possibility of incorporating a technocentre as part of some other local development, such as a town centre redevelopment or a conference centre. In the only cases in which discussions have proceeded beyond the first exchange of views, there has at present been no commitment from the central Government about finance. I cannot easily reveal where these discussions have taken place.

Computer Aided Design Committee

Mr. Macdonald: asked the Minister of Technology what steps he takes to ensure that recommendations from the Computer Aided Design Committee are adequately considered by a representative body or range of firms from the industries involved.

The Joint Parliamentary Secretary to the Ministry of Technology (Dr. Jeremy Bray): There is feed-back of information to industry through the membership of the Committee and its sub-committees. Also the reports of the Committee, including its recommendations, have been published and receive wide circulation. Where the application of computer aided design to particular industries has been studied the industries concerned are consulted through seminars.

Mr. Macdonald: As this Committee is largely composed of industrialists and was set up with the express purpose of ensuring that Mintech computer research is of practical interest to industry, how does it come about that on the first report of the Committee, which was unanimous, Mintech states that five out of eight


recommendations are of no interest to industry? Either the wrong people are making the recommendations or the wrong people are listening to them.

Dr. Bray: If my hon. Friend reads the reports of the Computer Aided Design Committee he will see that while valuable recommendations were made on the design of pipework, they were somewhat general and needed to be worked out in detail in discussions with particular firms. That is under way, some useful conclusions are emerging and some contracts have been placed.

Defence Equipment (Vietnam)

Mr. Frank Allaun: asked the Minister of Technology if he will prohibit the issue of licences to enable military aircraft of British design to be manufactured in the United States of America for sale to the American or South Vietnam Governments.

Mr. Fowler: No, Sir. Our policy on the supply of defence equipment which might be used in Vietnam was stated by my right hon. Friend the Prime Minister on 12th July, 1966.—[Vol. 731, c. 191.] Similar considerations would be involved in our approval of any licensing proposals.

Mr. Allaun: Is not this in breach of British policy—the policy that we do not supply arms for the Vietnam war—and is not this one application of British research that we do not want to see?

Mr. Fowler: I cannot for the life of me see how anything could have happened which is in breach of British policy, since there are no proposals currently under consideration by Her Majesty's Government for the future manufacture under licence in the United States of any British military aircraft.

Shipyards (Public Investment)

Mr. Ridley: asked the Minister of Technology how much public money has now been given, lent and promised to British shipyards in total.

Mr. Fowler: The Shipbuilding Industry Board has made or promised grants totalling over £9,300,000 to United Kingdom shipbuilders as well as loans of over £14 million. It has also promised grants in relief of interest on these loans. In

addition, the Government have certain shares and loan stock of which I gave details in reply to the hon. Member for Fife, West (Mr. William Hamilton) a moment or two ago.

Mr. Ridley: So the Government have now invested some £25 million more in industry. Before further money is invested, will the Government undertake to lay before the House a prospectus showing to what purpose the money is put and the rate of return that it is expected to earn upon it, so that the House may approve the investments made in its name before they are made?

Mr. Fowler: No, Sir. The House has approved the Shipbuilding Industry Act, 1967, the Industrial Expansion Act and the Shipbuilding Industry Act of this year. There was no dispute between the two sides of the House about the Shipbuilding Industry Acts. I cannot undertake to do what was not prescribed in those Acts. This is an industry of which every product is either an export or is import-saving, and I will not see it sold down the river, as some hon. Members would wish.

Mr. Shinwell: Is my hon. Friend aware that the Conservative Government provided credits for the shipbuilding industry in the North-East and elsewhere, and that the money that has been granted and lent by this Government is far better spent than was the money, amounting to hundreds of millions of pounds, spent by previous Conservative Governments on the research and development and production of aircraft which never flew?

Mr. Fowler: I am well aware of the provisions made by the previous Government to help the shipbuilding industry. In the first place, they were inadequate, and, in the second place, there was no precondition of any reorganisation in the industry in order to enable it to compete in the future in world markets. We are determined that that reorganisation will take place, and that we shall have a competitive shipbuilding industry.

Light Engineering (Machines)

Mr. Dempsey: asked the Minister of Technology what progress is being made in the designing of machines for light engineering; and if he will make a statement.

Dr. Bray: It is primarily the responsibility of industry to ensure satisfactory progress in machine design. The Ministry encourages good design practice as one element of sponsorship activities of the engineering industries, and assists the design of new machines both by development and pre-production contracts.

Mr. Dempsey: Is the Minister aware that in my constituency machines are being employed in the printing and knitwear industries which have had to be imported from Germany, not because of any lack of skill or material on our part but because of lack of industrial designers? Will my hon. Friend, therefore, launch some initiative to recruit designers so that we can assemble the machines in Britain, thus saving imports and helping employment?

Dr. Bray: When visiting light engineering firms, I have seen some very interesting developments in both printing and knitting machinery which will substantially help our balance of payments, but I believe that we would be quite wrong to suppose that we can be self-sufficient in all fields of machine design.

U.S.S.R. (Minister's Visit)

Mr. Boston: asked the Minister of Technology if he will make a statement on his official visit to the Union of Soviet Socialist Republics.

Mr. J. H. Osborn: asked the Minister of Technology what was the purpose of his visit to the Union of Soviet Socialist Republics.

Mr. Palmer: asked the Minister of Technology if he will make a statement on his official visit to the Union of Soviet Socialist Republics.

Mr. Benn: I visited the Soviet Union from 13th-20th May for a review of the Anglo-Soviet Technological Agreement in accordance with the provisions of that Agreement. I was also able to have a useful discussion with Mr. Kosygin. I will place a copy of my programme and the Agreed Minute in the Library of the House.

Mr. Boston: Will my right hon. Friend accept that this resumption of Ministerial contacts with the Soviet Union is very

welcome; and that, although this does not affect our view of events in Czechoslovakia last August, it is precisely in developing contacts of this kind that the best hope lies for improving East-West relations? Can he confirm, on the follow-up action and co-operation between industry and Government, that industry is very enthusiastic about the prospects here?

Mr. Benn: I can confirm what my hon. Friend said. Of course, the real work that goes on under the agreement is conducted by a very large number of industrialists, led by the C.B.I., who have engaged in very active exchanges over a period now of 18 months to two years. We are here talking about the development of our British trade in the long term in a very rapidly expanding market.

Mr. Osborn: I welcome increasing prospects of trade, but can the right hon. Gentleman give an assurance that scientific and technological teams going from this country to the Soviet Union will have the same access to factories and information as we give to our guests when they come to this country? Has the Minister been able to iron out past difficulties in this respect?

Mr. Benn: One of the reasons for an agreement of this kind is to provide Ministerial contact at the top where problems of the kind mentioned by the hon. Member can be discussed. I took the opportunity when I was there, when I visited the very successful British pavilion at the Automation Exhibition, of discussing with British business men the degree of access they can get to their customers in the Soviet Union. This is one of the matters, among many others, which I hope, under the agreement, to be able to bring to the attention of the Soviet authorities at the highest level.

Mr. Palmer: Did my right hon. Friend, in his very proper and free exchange of scientific opinion and information on technological developments as between civilised countries, discuss with the Soviet leaders the case of Mr. Gerald Brooke, who has been barbarously treated by the Russians for freely and openly expressing the same political opinions as my right hon. Friend and I accept?

Mr. Benn: As I explained when I arrived there, before I left, and on my return, the subject of Gerald Brooke was


not on the agenda of my talks because, as the House knows, this is a matter for my right hon. Friend the Foreign Secretary.

Sir H. Legge-Bourke: Will the Minister say whether there has been any attempt to resolve the somewhat different opinions held between the British Government and the Department of Defence in the United States over this type of technological co-operation?

Mr. Benn: I am not aware of any difficulties which have arisen in this case. The arrangements that we have with the Soviet authorities, which are principally industrial in character, are wholly compatible with our international obligations, and are conducted in such a way as to open up areas of trade, in which, I might add, American businessmen in the Soviet Union are also very active indeed.

Mr. Grimond: As the Minister apparently expressed regret for the history of British imperialism in Russia, did he draw the attention of the Russians to their own imperialism and suggest that they should do something about it?

Mr. Benn: I was lecturing at the State Committee on the problems of the modernisation of the British economy. There is no doubt whatsoever, if we look back over the last hundred years, that the diversion of effort that occurred in this country in the maintenance of a large overseas empire is one of the reasons why, in the area of management and of industrial restructuring and in a lot of other ways, this country acquired some of its current economic problems.

Underwater Engineering

Mr. Hector Hughes: asked the Minister of Technology if he will state the progress made in the study commissioned by his Department with the Underwater Engineering Group of the Construction Industry Research and Information Association into the industrial research and development needs of the world's seas; and when the report will be published in whole or in part.

Mr. Fowler: A team of three marine technology experts, set up by the Construction Industry Research and Information Association, has begun work on a study of the research requirements of United Kingdom industry in the fields

of diving technology and underwater engineering, and an interim report is expected by the end of July, 1969, with, it is hoped, a final report by the end of 1969 or early in 1970.

Mr. Hector Hughes: Does the Minister realise that from Britain's point of view the most important part of this research relates to the seas surrounding Britain, and, from Aberdeen's point of view, the North Sea? Will he make an early report on those aspects?

Mr. Fowler: We are well aware that the most important part of the ocean from the British point of view is the sea surrounding Britain. I am sure that the importance of the area east of Aberdeen has not escaped the notice of Her Majesty's Government.

Technological Industry (Midlothian)

Mr. Eadie: asked the Minister of Technology at what stage his Department became involved in the siting of new technological industry in the county of Midlothian.

Dr. Bray: The Department encourages the establishment of technologically advanced industry in the development areas, including Scotland, at any stage when it can help in the furtherance of the Government's development area policy.

Mr. Eadie: Do I understand from that reply that the rôle which my hon. Friend's Department has played in studying new technological industry in Midlothian has been one of continuous assistance rather than of hindrance?

Dr. Bray: The Government, and the Ministry of Technology in particular, have very good reason to be proud of their record in Scotland, in that the number of new jobs created in electronics since 1964 has been some 14,000. Midlothian is particularly well situated and can, I think, look forward with confidence to the future.

Mrs. Ewing: Can the Minister say whether this departmental involvement in the study of industry in Midlothian of any other county comes before or after the Board of Trade, the Department of Economic Affairs, the Scottish Economic Planning Board, the Scottish Planning Council and the local authorities? Is he at the end or at the beginning of the queue?

Dr. Bray: The concerns of different Departments come into play at different stages. Because of our close knowledge of the future plans of firms we are sometimes in at the beginning; in other cases we are concerned only at a very much later stage.

Motor Vehicle and Passenger Cars (Production)

Mr. J. H. Osborn: asked the Minister of Technology what is now the current rate of production per month of motor vehicles and passenger cars, respectively; and how this figure compares with the average to date this year, and the average monthly production last year.

Mr. Fowler: No information about the current rates of production is available. The average rate of car production in the 13 weeks ended 29th March this year was 34,735 a week, compared with 35,966 in the corresponding period of 1968 and 34,922 a week in 1968 as a whole. The corresponding commercial vehicle weekly average rates were 9,265, 8,021 and 7,869.

Mr. Osborn: Has there not been a drastic drop in production, as was suggested by Question No. 19? What now are the prospects for the motor industry? What is the percentage increase in exports necessary due to restrictions resulting from the credit squeeze, fuel tax and purchase tax? What are the trends for the industry in future?

Mr. Fowler: The hon. Member has got it quite wrong; there has not been a dramatic fall in production. [HON. MEMBERS: "Oh."] There has not been a dramatic fall in production; I emphasise this for the benefit of those on the benches opposite who are more interested in prejudice than the facts. The percentage drop in the production of motorcars in March, 1969, over the previous March was almost entirely accounted for by the effect of industrial disputes. As my Answer makes clear, commercial and industrial vehicle production was substantially up over last year.

Sir G. Nabarro: Is it not true that Question No. 19 is in the name of an hon. Member representing a motor manufacturing constituency, the City of Oxford? It says that there was a 25 per cent. drop in production of motorcars.

If that figure is inaccurate, will the Parliamentry Secretary tell the House what his figure is, because I believe the figure in Question No. 19 is accurate.

Mr. Fowler: I am delighted to know that the hon. Member for Worcestershire, South (Sir G. Nabarro) is aware that Oxford is a centre of motor manufacturing. [HON. MEMBERS: "Answer the question."] That is the answer to the first part of his question. As to the second part, I have already answered that the drop was almost entirely due to industrial disputes.

Short Brothers and Harland and Rohr Corporation

Mr. McMaster: asked the Minister of Technology if he will make a statement on the result of the negotiations with the Rohr Corporation to take an equity interest in Short Brothers and Harland Limited.

Mr. J. P. W. Mallalieu: I have nothing to add to the reply I gave on 16th April.—[Vol. 781, c. 1144.]

Mr. McMaster: If these negotiations do not reach a satisfactory conclusion, will the hon. Gentleman take all reasonable steps to see that sufficient work is placed with this company to obtain employment in research and development both in aircraft and missiles in view of the excellent record of the company?

Mr. Mallalieu: I am delighted to see that the company is taking those steps and I congratulate it on the Lockheed order which it has recently obtained.

Nuclear Power Stations (Breakdowns)

Mr. Eadie: asked the Minister of Technology if he will list the nuclear power stations in Great Britain operated by the Atomic Energy Authority which have been subject to breakdown during the last five years; and what were the additional costs and the loss of revenue involved.

Mr. J. P. W. Mallalieu: I have already given the hon. Member the information for which he asked in respect of the one reactor at Chapelcross which has been out of commission since May, 1967. The three other reactors at Chapelcross and the four reactors at Calder Hall, which is the only other power station operated


by the Authority, have all operated successfully over the last five years.—[Vol. 776, c. 1320–1.]

Mr. Eadie: Is my hon. Friend aware that, although the whole country can be proud of the technological achievement in this field, it can be argued that the same results could have been achieved less expensively and that miners' jobs would not have been sacrificed by bogus differential estimates?

Mr. Mallalieu: I know that that point can be argued because I have heard my hon. Friend argue it, but I do not accept it.

Mr. Lubbock: While congratulating the Atomic Energy Authority on the remarkable reactors it has been operating since its inception, may I ask what are the additional costs and the loss of revenue involved as a result of the welding defects on the prototype fast reactor now under construction?

Mr. Mallalieu: I believe I have given that information to the House, but I have not got it in my head. I shall certainly take steps to give it to the House if I have not already done so.

Mr. David Price: Does the hon. Gentleman agree that the reactors operated by the Atomic Energy Authority are in the main prototype reactors and a fair comparison with coal-fired stations is in looking at the costs with the Central Electricity Generating Board and the South of Scotland Electricity Board? Will he confirm that the utilisation of British reactors by the two generating boards is higher than any reactors operating anywhere else in the world?

Mr. Mallalieu: Yes, I confirm that with pleasure.

Dounreay Reactor

Mr. Hector Hughes: asked the Minister of Technology why the Dounreay materials testing reactor was closed down after 11 years; where and when its unfinished work will be resumed; what employment will be offered to the workers there; and what effect this will have on the employment conditions in the City of Aberdeen.

Mr. J. P. W. Mallalieu: The reactor was closed down because the Atomic Energy Authority decided, after careful

consideration, that its needs for materials testing irradiation facilities could best be met by concentrating remaining work at Harwell. Staff will be transferred to other work at Dounreay, and employment conditions in Aberdeen should not be affected in any way.

Mr. Hector Hughes: Does my hon. Friend realise that this closing down is very serious from the point of view of not only interference with the valuable work carried on there but interference with workers who live there who will have to transplant their homes to another area? Will he therefore give the evidence on which his deep consideration was based?

Mr. Mallalieu: I understand that there will be no uprooting whatever. The staff will be transferred to other work at Dounreay itself.

Jump-Jet Airliner

Mr. Albert Roberts: asked the Minister of Technology what consideration has been given to assisting the development of a jump-jet airliner.

Mr. J. P. W. Mallalieu: As I told the House on 16th April, studies have been commissioned of various aircraft concepts, and also of the traffic and environmental problems which are connected with intercity VTOL services. Decisions on further assistance must await the outcome of these studies.—[Vol. 781, c. 1132–3.]

Mr. Roberts: Does my hon. Friend realise that if the jump-jet airliner can be developed successfully it will make a tremendous saving in money and the construction of runways? Will he bear in mind that if there are any possibilities for this they should receive immediate attention?

Mr. Mallalieu: Yes, most certainly. We expect to have the preliminary studies by the autumn. We shall evaluate them very carefully, and hope to begin design studies about June next year. This subject is of immense importance.

Mr. Maxwell-Hyslop: Will the hon. Gentleman bear in mind that what killed previous progress, as for instance the rotodyne, was the high noise level? Does he agree that the multiple lift system is inherently better than the vectored-thrust system for civil aircraft applications?

Mr. Mallalieu: I will take note of what the hon. Member says in his second point. Of course, noise could vitiate the whole project, and a great deal of money and effort are being expended to keep down the noise.

Aerospace Industry

Mr. Brooks: asked the Minister of Technology whether he will publish a Green Paper showing the Government's proposals for the future of the British aerospace industry; and if he will make a statement.

Mr. J. P. W. Mallalieu: The future of the British aerospace industry depends on its ability to develop and produce equipment for a highly competitive international market. The Government, through their defence procurement and in other ways, will continue to support the industry in its efforts. I do not consider that it would be appropriate or helpful to publish a Green Paper.

Mr. Brooks: In view of the continuing uncertainties about the rôle of the British avionics and aero-engine industries in such European projects as the multi-combat aircraft, is it not vital that this House, the country and informed opinion should have an opportunity to discuss just where we are going in these European ventures?

Mr. Mallalieu: The policy of the Government towards the aircraft industry is well known to the House and to the aircraft industry. Should my hon. Friend wish to have a debate in the House we would welcome it, but it would be a matter for him to put to the Leader of the House.

Sir Ian Orr-Ewing: Will the hon. Gentleman take into account some of the recommendations of the recent Report of the Select Committee on Science and Technology, which could have considerable healthy repercussions on the wellbeing of the aerospace industry?

Mr. Mallalieu: Yes certainly, and not only those, but the Report produced by Mr. Elstub and his Committee as well as the S.B.A.C.

Oral Answers to Questions — SCOTLAND

Selective Employment Tax

Mr. Gordon Campbell: asked the Secretary of State for Scotland what representations he has received about the effects in Scotland of the proposed increase in selective employment tax; and what reply he has sent.

The Minister of State, Scottish Office (Dr. J. Dickson Mahon): Two such representations have been received. The replies drew attention to the wide range of inducements available under the Government's regional policies and emphasised the desirability of supporting the development of the Scottish economy in this way rather than by shielding it from general taxation.

Mr. Campbell: Does not the sparsity of representations show that the many people in Scotland whose interests are seriously damaged by this obnoxious tax have lost any confidence that the Secretary of State can any longer do anything about it? Does the Secretary of State for Scotland consider that this tax is good for the Highlands and Islands?

Dr. Mabon: No, Sir; it does not show that. The representations, which were confined to the Perth branch of the Communist Party and the Dundee Chamber of Commerce, show what bad company the hon. Gentleman is keeping.

Mr. William Hamilton: What is the net gain to Scotland, taking into account the S.E.T. and the regional employment premium?

Dr. Mabon: The net yield of the tax itself—that is, at the rates to be applied from 7th July—will be about £57 million a year, as against the £10 million in S.E.T. additional payments to manufacturers and regional employment premium payments of £39 million, which place Scotland in a more favourable position than Great Britain as a whole.

Mr. Maudling: My hon. Friend the Member for Moray and Nairn (Mr. Gordon Campbell) asked the Minister about the position qua the Highlands and Islands. The Minister did not answer that. Will he now answer it?

Dr. Mabon: If the hon. Gentleman will be kind enough to table a Question, I will certainly give him the up-to-date figures.

BRITISH STEEL CORPORATION (PRICES)

The following Question stood upon the Order Paper:

MR. EDDIE GRIFFITHS: TO ask the Minister of Power, in view of increased cost of production and the need for increased capital investment over the next six years, whether, following the recently published National Board for Prices and Incomes Report on Steel Prices, he will now authorise the full price increases applied for by the British Steel Corporation; and whether he will make a statement.

The Minister of Power (Mr. Roy Mason): With permission, Mr. Speaker, I will now answer Question No. 73.
The Government have considered the report of the N.B.P.I. on Steel Prices Report No. 111) which is being published this afternoon.
The Board's main recommendation is that the B.S.C. should make price increases to bring in additional revenue of £40 million per annum as against the £50 to £55 million which the Board estimated as the effect of the Corporation's proposals.
The Government accept this recommendation and are still considering the other recommendations in the Report.

Mr. Speaker: Mr. Eddie Griffiths.

Several Hon. Members: rose—

Hon. Members: He is not here.

Sir K. Joseph: On a point of order. How did the Minister come to answer a Question that had not been asked, Mr. Speaker?

Mr. Speaker: The Minister should have informed the hon. Member for Sheffield, Brightside (Mr. Eddie Griffiths)—I hope he did—that his Question was to be answered. This is most irregular.

Sir K. Joseph: May I protest against the business of Ministers answering Questions, if they have been asked, and no doubt giving to the Press—I have not evidence of this—the Answer, but giving no information to the Opposition or to the House? We have not seen the Report of the National Board for Prices and Incomes, which I have no doubt is

a long one, nor have we had time, obviously, to study the Report or the Minister's response.
If I may try to formulate some questions that I have obviously thought about in preparation for this matter, may I ask the Minister whether he will agree that this is, once again, a case of a nationalised industry, vital for our export trades, being far quicker to raise prices than to cut costs?
Secondly, how does the Minister reconcile this apparent subsidy—that is, the cut in the rise in prices that the B.S.C. thought was commercially necessary—with our international obligations, on the one hand, and with all the brave talk of commercial discipline, on the other?
Thirdly, is it not monstrously unfair to the private steel industry to have to compete with a nationalised and subsidised competitor?
Finally, are not the Government embroiled in all these dilemmas only because they chose to nationalise steel instead of removing the Steel Board and leaving individual companies to compete and make their own prices?

Mr. Mason: The right hon. Gentleman did not do bad for someone who has not had a glance at the Report. There has been no general increase in steel prices for the past three years. Meanwhile, the industry's materials and services have increased in cost by £60 million. Further, between 1961 and 1968 steel prices rose on average by 10 per cent. whilst private manufacturing prices, on which they have thrived, went up by 21 per cent.
As to our international obligations, the proposal for an additional revenue of £40 million, when the B.S.C. went forward for an increase initially of £58 million and reduced it to £55 million during the course of the examination, is not in contradiction with any of our international obligations.
When the right hon. Gentleman reads the Report, he will see that the private sector is given licence on almost all of its products to quote prices below, on a par with, or above those of the nationalised steel sector.

Mr. Michael Foot: Will my right hon. Friend accept that many of us who come from steel constituencies will be very


concerned about the Report of the National Board for Prices and Incomes, which appears to impose limitations on a publicly-owned industry which would not be imposed on a privately-owned industry?
Is it also the case that the further parts of the Report, to which my right hon. Friend referred, contained detailed proposals for interfering in the arrangements between the Steel Corporation and its customers, interferences which would be contradictory to the Statutes passed by the House, in defiance of the legislation which is now before the House, and in contradiction of the recommendations of the Select Committee on Nationalised Industries?
Will my right hon. Friend therefore undertake that neither he nor the Government will accept from the National Board for Prices and Incomes recommendations which substitute the whims of the Board for the will of Parliament?

Mr. Speaker: Order. Long questions mean fewer questions by other hon. Members.

Mr. Mason: I am not aware that we shall be torn between the two stools to which my hon. Friend referred in the latter part of his question; so I would not worry unduly about that.
My hon. Friend should be aware, as no doubt the House is aware, that the N.B.P.I. is the chosen instrument when there is a major price increase confronting a nationalised industry. The Board has looked at it all and has recommended generally an increase up to £40 million. The Iron and Steel Consumers' Council also proposed a scaling down of the initial proposal. Therefore, we must take note of both those bodies.

Sir G. Nabarro: As the N.B.P.I. recommended increases which will bring in £40 million against the British Steel Corporation's request for £50 to £55 million, will the Minister tell the House how an increase in steel prices of £40 million will, first, help our export trade and, secondly, help the policy of import substitution, because it places British steel in an uncompetitive position now with equivalent imported steels?

Mr. Mason: If the hon. Gentleman follows these questions very closely, he will have noticed that Europe and Japan, during the past six months, have already taken advantage of this trend in steel and have increased their prices. Therefore, this proposed increase will not have the effect on imports that the hon. Gentleman refers to.

Mr. Tinn: Has my right hon. Friend noted that the British Steel Corporation achieved a reduction in costs of £15 million in one year? Will he bear in mind that the White Paper—" Nationalised Industries: A Review of Economic and Financial Objectives"—required that prices should be related to long-run marginal costs and that the proposed price increases asked for by the Corporation would still have been below those marginal costs?

Mr. Mason: When my hon. Friend reads the Report, he will notice that reference is made to long-run marginal cost and to the financial objectives set out Command 3437. My hon. Friend is also right that the return on capital last year from the B.S.C. was most unsatisfactory, and that is why we must establish this £40 million increase.

Mr. Lubbock: Is the Minister aware that it is very inconvenient for hon. Members to have to deal with this statement when they have not had a chance of reading the Report? Why could not he have asked the hon. Member for Sheffield, Brightside (Mr. Eddie Griffiths) to table an Oral Question which could have been answered tomorrow, which would have given us at least 24 hours in which to study the findings?
May I ask the Minister, in detail, how he justifies the difference of £10 to £15 million between the recommendations of the Prices and Incomes Board and the actual price increase he has allowed? Further to the question asked by the hon. Member for Worcestershire, South (Sir G. Nabarro), what assessment has his Ministry made of the effect on our balance of payments of this price increase on the major steel-using industries, such as the automobile industry?

Mr. Mason: It is not easy to make a calculation of that kind in relation to the balance of payments, because the prices


will vary from product to product. The British Steel Corporation has carried out a major review of pricing, the first major review affecting British steel for 30 years. There are 50 schedules, and there are hundreds of prices in each schedule affecting different types of product. On average, steel will go up by 5 per cent., but to a big steel user whose product contains 20 per cent. of steel the increase in price will be 1 per cent.

Mr. Shinwell: Is my right hon. Friend aware that hon. Members on both sides who are concerned about the competitive position of the shipbuilding industry are disturbed about an increase in steel prices? Was this taken into account by the Board and by my right hon. Friend before a decision was reached?

Mr. Mason: I cannot go into the shipbuilding industry, the car industry or separate industries, because, as I said in my original Answer, we are giving consideration to how the £40 million should be spread. The N.B.P.I. suggests that we should take note of 12 special products, but the Government have not yet decided that this is the best course.
Second, as to why it is essential to make the statement today on the date of publication, the Corporation has been losing £1 million a week during the examination and could lose up to £4 million a month while we are making up our mind. Therefore, we had to state quite clearly that the £40 million is accepted, and the method is still to be urgently considered.

Mr. J. H. Osborn: Will the right hon. Gentleman say which are the other recommendations he has accepted, in addition to the recommendation in paragraph 84 of the Report, and what is the reaction of the private sector to the recommendation in paragraph 87?

Mr. Mason: I have already pointed out that if the private sector thought that there were unfair practices, then, under Section 30 of the 1967 Act, it would be obliged to appeal to me. Therefore, I could not prejudge any decision on that.
Second, once the method of abatement has been agreed, the private sector will, according to the Report, be able to quote prices below, on par, or above the British Steel Corporation's prices.

Mr. Hooley: Will my right hon. Friend agree that a 5 per cent. increase over

a period of five years compares very reasonably with other major industries in this country; second, that a limitation on the price increase is of major importance for major steel using industries in Britain, including shipbuilding, and is of great importance for our export competitiveness?

Mr. Mason: I am much obliged to my hon. Friend; he is absolutely right. Although the Corporation has not got what it initially proposed, if prices had not moved at all it would over the next five years have lost £100 million on revenue which it was anticipating.

Mr. Biffen: Will the right hon. Gentleman confirm that he would regard it as thoroughly undesirable if the steel industry or any other nationalised industry were required to subsidise its customers? Can he confirm that one of the consequences of Mr. Aubrey Jones having overturned the commercial judgment of the Steel Corporation is that the chairman of any other nationalised concern will put in an extra amount in his application in the expectation that it will be specifically scaled down by the Prices and Incomes Board?

Mr. Mason: I cannot anticipate what another nationalised industry may do in the future. That will be up to the industry in the light of this Report.

Mr. John Mendelson: Will my right hon. Friend accept that there will be appreciation in all the steel-producing areas for his having taken the earliest opportunity to make his statement to the House, regardless of any technicalities about which other hon. Members not representing steel constituencies might be concerned?
Second, will he tell us whether, having varied the application, he is now satisfied that the steel industry will be fully provided with the necessary capital and all the other requirements for its expansion over the next five years?

Mr. Mason: Even with the abatement and without any additional cost savings—it is obliged to look at that, and the Report makes a strong point about it—the Corporation's gross profit in 1970–71 before depreciation is forecast at £180 million, which is a rate of return not out


of line with what has been earned by major steel undertakings elsewhere.

Mr. Edward M. Taylor: Will the right hon. Gentleman confirm that the new price schedules are United Kingdom schedules and that there is no question of introducing regional differentials for this nationalised industry?

Mr. Mason: That has not come before me so far, and there is no mention of it in the Report.

Mr. Dempsey: Is my right hon. Friend aware that Continental steel prices are already climbing over the tariff wall and conquering certain markets in this country? What assessment has he, therefore, placed on the effect which the increase will have on the competitive ability of British steel and employment in other industries?

Mr. Mason: I referred to this earlier in reply to the hon. Member for Worcestershire, South (Sir G. Nabarro). The European steel industries have taken advantage of the recent cyclical trend and have increased their prices. Therefore, we do not have to take so much note of the import seriousness of the point which my hon. Friend refers.

Mr. Geoffrey Lloyd: Does the Minister's supplementary answer a few moments ago mean that the motor industry, as a big user, will not have to pay more than 1 per cent. more for its steel?

Mr. Mason: It depends entirely on the percentage of steel going into the final product. If it is 20 per cent. in the final product, the increase will be 1 per cent. in the final price.

Mr. Ashton: Does my right hon. Friend agree that the steel industry has for many years required a massive injection of new capital and capital equipment, and will he try to ensure that the revenue from this increase is used on new capital equipment in order to put the industry in a better position to compete with European manufacturers?

Mr. Mason: This will be in the forefront of the Corporation's mind.

Mr. McMaster: Will the right hon. Gentleman note that the shipbuilding industry, because it has been such a large

user of steel, has always been quoted special prices, and will he note, also, the many anxious questions put to him today relating to the Upper Clyde and the large order books of the shipbuilding industry, orders which will have to be taken at a loss unless a specially favourable price is quoted to shipbuilding?

Mr. Mason: Is the hon. Gentleman suggesting that I or the B.S.C. should subsidise British shipbuilding? He ought to put the matter in proper perspective in relation to the figures. The British shipbuilding industry, the whole of it, takes 450,000 tons of plate per year. The British steel industry produces 27 million tons of steel a year. It is a very small user.

Sir G. Nabarro: It is very important to shipbuilding.

Mr. Mason: It may be; but the rate of return on capital throughout the whole of the shipbuilding industry last year, including some just struggling yards, was 2·8 per cent., but the Steel Corporation's rate was down to nil.

Sir J. Eden: Was not the Corporation's assessment of its forward capital requirements based on its receiving the full £55 million, and did not the Minister give this recommendation for a price increase his full and personal backing? Does not the outcome now mean that the Corporation will have to come back sooner than it otherwise would have done to ask for a further tranche of capital?

Mr. Mason: What is means is that, as regards borrowing powers and the Bill now before the House, borrowing is not affected at all. The figures in the White Paper and the Bill still stand. But it might mean that there will be a smaller dividend from the p.d.c. than we planned hitherto.

Mr. McMaster: In view of the unsatisfactory nature of the Minister's replies, I beg to give notice that I shall raise the matter again.

Sir T. Beamish: On a point of order. Mr. Speaker. May I raise with you two matters arising out of the statement just made? First, this is the first time I have ever known a Minister make a statement to the House in reply to a Question when


the hon. Member who put the Question down was not here. I should like to know, Sir, whether that was in order.
Second, even if it be in order, is it not a great discourtesy to the House and an attempt to steal a march on the House by making a statement on this important matter when no one has had opportunity to read the material in question, which was not in the Vote Office until exactly 3.30?

Mr. Speaker: I shall deal with the points of order seriatim. First, this is not the first time that a Minister—[HON. MEMBERS: "Hear, hear."] Order. I need no encouragement from one side. This is not the first time that a Minister has answered a Question on the Order Paper when the hon. Member who had the Question down was not there to ask it.
I said at the outset that it was quite irregular. I should have thought that, if the Minister proposed to answer a Question on the Paper out of turn, as has been done today, he would let the hon. Member know—I would imagine that he did—

Mr. Mason: indicated assent.

Mr. Speaker: —and the hon. Member should have been here to put his Question. But it has happened before.
On the broader issue, it is in order for a Minister to answer any Question on the Order Paper whether it is reached or not and, a fortiori, the Minister could have made a statement to the House. What apparently the right hon. Gentleman did was tell the hon. Member for Sheffield, Brightside (Mr. Eddie Griffiths) that he would make his answer in reply to the hon. Gentleman's Question. That is as far as the Chair can go.

Mr. Peyton: Further to that point of order, Mr. Speaker. Had the Minister made a statement—and we accept that he had the alternative of doing so—he would have been under some obligation to make a copy available to my right hon. Friends. This is a very serious statement, delivered against a background of considerable discourtesy.

Mr. Speaker: There is something in what the hon. Gentleman has said, but

it is a fact that a Minister can answer a Question on the Order Paper at the end of Question Time if he chooses to do so. I can do nothing about it.

Several Hon. Members: rose—

Mr. Speaker: Order. I hope that we can get on. We have a lot of business before us.

Mr. Tinn: Further to that point of order, Mr. Speaker. It may assist the House if I say that my hon. Friend the Member for Sheffield, Brightside (Mr. Eddie Griffiths) had been informed by the Minister and intended to be present. I can only assume that he has been prevented from being here by circumstances beyond his control. I am sure that he intended no discourtesy.

Several Hon. Members: rose—

Mr. Speaker: Order. I am willing to listen to points of order, but I have to consider the business of the House. We have a lot to do.

Mr. Lubbock: Further to that point of order, Mr. Speaker. Since a Minister has the option of answering a Question which he has stimulated an hon. Member to put down on the Order Paper the night before or of making a statement, a copy of which would be available through the usual channels, and since on this occasion the right hon. Gentleman has chosen, to the great inconvenience of the House, to adopt the former course, will you refer this matter to the Select Committee on Procedure so that, on all future occasions when important matters of this kind are to be the subject of an announcement by a Minister, it is done in the proper form by means of a statement?

Mr. Speaker: I can deal only with points of order. I cannot deal with the hon. Gentleman's charge that the right hon. Gentleman stimulated an hon. Member to put down a Question That is a matter of esoterics and philosophy and not of order for Mr. Speaker. If the hon. Member for Orpington (Mr. Lubbock) wishes to raise the question whether a Minister can answer a later himself take it up with the Select Com-Question than is arrived at on the Order Paper during Question Time, he can mittee on Procedure.

RHODESIA

Sir Alec Douglas-Home: (by Private Notice) asked the Secretary of State for Foreign and Commonwealth Affairs whether he will make a statement on the situation concerning Rhodesia following Mr. Ian Smith's broadcast last night.

The Secretary of State for Foreign and Commonwealth Affairs (Mr. Michael Stewart): Mr. Smith announced at a political meeting in Rhodesia on 7th May that the constitutional proposals which he advocated would sound the death-knell of majority rule. Last night's broadcast has not, therefore, surprised us, though it provided saddening confirmation of the régime's attitude.
I have not yet seen the official text of the constitutional proposals which Mr. Smith was publishing in Salisbury this morning. But it seems clear that they are broadly in line with those which my right hon. Friend the Prime Minister described on 18th February as
… a complete and flat denial of at least five of the six principles".—[OFFICIAL REPORT. 18th February, 1969; Vol. 778, c. 204.]
If the door is now being slammed it is not by us, but by the régime. We have made repeated attempts to reach an honourable settlement. Mr. Smith said last night a number of things with which I could not agree; but there is one point he made which I accept and which is central to our inability to reach agreement. Mr. Smith said:
Throughout the entire series of discussions the British have been obsessed with the question of majority rule".
I accept that. It is the first of the principles which we inherited from our predecessors and it is basic to our dispute with the illegal régime.
I think that it was generally recognised, both in the country and in this House, that, in the "Fearless" proposals we made a very fair offer. Some people thought it went too far. My right hon. Friend the Prime Minister resisted pressure at the Commonwealth Conference to withdraw these proposals, but Mr. Smith and his colleagues have turned them down.
We now await the results of the referendum of the minority electorate,

which has been arranged for 20th June. Let us hope that those who are able to vote on that day will choose a wiser course for the whole future of their country than the disastrous counsel urged on them by Mr. Smith.

Sir Alec Douglas-Home: If the early reports of the proposed constitution are right, then, of course, this country could not be a partner in that kind of constitution.
The Foreign Secretary has referred to the referendum and until it is held all hope is not dead. Can he give, in a suitable form, as he did before, the substance of the exchanges between Her Majesty's Government and Mr. Smith during the last few months? This would help us in making up our minds as to whether there is any prospect for the future.
It might also be right to have a short debate after the Whitsun Recess after seeing that information, if only to show before the referendum that there could be an honourable and dignified alternative as a basis for independence for Rhodesia.

Mr. Stewart: On the first point, my answer is, "Yes, Sir". Our exchanges with the régime have taken place under an agreement with them that, subject to notice from either side, they would remain confidential. Now, in the light of Mr. Smith's broadcast, we propose to give this notice and to arrange as soon as possible thereafter for publication of a White Paper giving the text of our exchanges with the régime since the Salisbury talks last November.
As the right hon. Gentleman knows, the question of a debate is not for me, but I am sure that my right hon. Friend the Leader of the House will be aware of the House's feeling on the matter. I think that the right hon. Gentleman said that there was an honourable alternative available. I take him to mean an honourable alternative to what Mr. Smith is proposing. That is certainly so and we have made it clear very often.

Mr. Sandys: While I realise that the prospects are not promising, may I appeal to the Government even at this eleventh hour to make a further last attempt to settle this lamentable dispute by negotiation?

Mr. Stewart: The right hon. Gentleman refers to "negotiations". Brushing aside all the elaborate details, and so on, our position can be described as follows: we have been prepared, and are prepared, to be flexible on details, on form, and even, within reason, on timing. But there is one matter that is not susceptible to compromise. Any settlement, to be acceptable, I would have thought, to anyone in this House, must be a settlement which would mean unimpeded progress within a reasonable time towards majority rule. I think that every right hon. and hon. Member would feel it to be the least one could require. I am afraid that it is inescapable from Mr. Smith's pronouncements that he does not accept that. If at any time any régime in Rhodesia is prepared to accept it, then we shall have a different situation.

Mr. George Brown: The situation in Rhodesia is not, as we all know, concerned only with that. I ask my right hon. Friend, since the so-called Prime Minister of the illegal régime has thought himself safe enough to make his announcement, whether my right hon. Friend has had any discussions with the South Africans recently about the situation.

Mr. Stewart: I think that my hon. Friend knows that, over a long period, we have had discussions with the South African Government and with other Governments about this whole problem.

Mr. Alexander W. Lyon: Would my right hon. Friend agree that this latest announcement of Mr. Smith is no more important than his announcement of U.D.I.? What is important, now as then, is what the Government's response will be to the announcement? Will he not agree that, in coming to their conclusion on the referendum, the electors in Rhodesia might find it helpful to know that, if they decide in favour of Mr. Smith, the proposals made in "Fearless" will no longer lie on the table?

Mr. Stewart: To pursue the metaphor of the table, if Mr. Smith's proposals were accepted by the referendum that would mean that they had, in effect, pushed those proposals off the table. Whether any subsequent or wiser choice could put them back again, we do not yet know. It is quite clear that Her Majesty's Government

and, indeed, all the Governments of the world—because this is mankind's problem—must resolve to pursue steadily the present course of denying recognition and maintaining sanctions against an illegal régime which denies human rights.
The importance of Mr. Smith's broadcast, I think, is that it now presents to those people in Rhodesia who have a vote a choice which they can still make—a choice between a course which means disaster for their country and one which could reconcile not only the different races in Rhodesia to one another but Rhodesia itself to mankind.

Mr. Thorpe: If the terms of Mr. Smith's broadcast are confirmed as accurate, is the right hon. Gentleman aware that it will come as no surprise that those who started this rebellion should be the first to break off negotiations? While the ultimate application of the six principles will thereby become more difficult to implement, none the less, the adherence to them of the majority of this House, and the Government, in particular, is, if anything, strengthened in the face of this new development.

Mr. Stewart: I would agree with both the things that the right hon. Gentleman says. It has been clear all along that Her Majesty's Government have been extremely anxious to reach an honourable settlement. We have faced one example of intransigence after another and there is certainly no doubt—I trust that there is none in any part of the House—that we are all committed to the six principles.

Mr. Paget: Is my right hon. Friend aware that I do not regret what has happened any the less because I foresaw that this would be the result of a sanctions policy? Is he aware that, in effect, this means that Rhodesia becomes a protectorate of the Union of South Africa? Is there much point at this stage in our injuring ourselves by maintaining sanctions against a portion of the territory of South Africa?

Mr. Stewart: Obviously, I cannot accept the proposition that this is a result of the policy of sanctions. It is inescapable, when one considers the history of this matter, that this is the result of the determination of a certain number of people in Rhodesia to maintain a policy


which permanently denies equal justice to a large number of their fellow subjects. The premise, therefore, of my hon. and learned Friend's question falls down.

Mr. Hastings: Since the Government have said that the purpose of sanctions is to bring the Rhodesians to the conference table, and since, regrettably, the referendum may lead to a situation in which further negotiations are impossible, would the right hon. Gentleman make it clear to the House what, specifically, will be the purpose of sanctions then?

Mr. Stewart: The purpose of sanctions is to bring home to those who are responsible for policy in Rhodesia the unrelenting hostility of the whole of mankind to the racialist principles on which their policies are based. I am certain that no one in the House who has any responsible knowledge of this subject would expect that, because of this statement or because of a possible result of the referendum, we should either condone what is happening in Rhodesia or relax the measures now being taken against it.
This may take a long time, but the issue is so great that I do not believe that we or any other nation can neglect our responsibilities.

Mr. Philip Noel-Baker: Will my right hon. Friend tell the electorate of Rhodesia in plain terms that Mr. Smith, like my hon. and learned Friend the Member for Northampton (Mr. Paget), is living in a dream world, and that his policy of permanent serfdom for the Africans can only prepare the way for the eviction of all Europeans from Rhodesia?

Mr. Stewart: I believe that, in the long term, this is true. What gives this matter its really serious and tragic connotation is that, while it may be possible in Rhodesia, as in some other parts of the world, to maintain for a time régimes which exalt tyranny and deny justice, those who try to do that lay up fearful retribution, either for themselves or for their successors.

Mr. Evelyn King: Were we not told initially that the purpose of a policy of sanctions was to impel Mr. Smith to an agreement? Is it not a fact that that is now shown to be a proven failure—

Mr. Shinwell: So what?

Mr. King: —and that, therefore, the cost of it has fallen overmuch upon Great Britain, while other nations have breached it? Will the right hon. Gentleman undertake not to reinforce sanctions?

Mr. Stewart: No, Sir. The object of sanctions must be to bring about a situation in which, in the end, whoever is able to do so in Rhodesia comes to terms not only with us but with mankind and with justice. If the hon. Member is saying positively that we should, at this stage, abandon sanctions and recognise the illegal r—gime, he should say so without equivocation. If his question does not imply that, it has no significance.
As to the comparative burden of sanctions on us and on other countries, it was with that in mind that Her Majesty's Government proceeded to the step which made sanctions mandatory, so that they would apply to other countries as well as to ourselves. I was sorry that we did not have the hon. Member's support on that occasion.

Mr. Crawshaw: Would my right hon. Friend agree that those hon. Members who have supported Mr. Smith since U.D.I. could best serve the interests of Rhodesia between now and the referendum by making it clear that even they are not prepared to accept the terms which Mr. Smith has put forward?

Mr. Stewart: It is my belief that no one in this House would say that he could accept the terms which Mr. Smith has put forward. I hope that that is so. If I replied—as I did to the hon. Member for Dorset, South (Mr. Evelyn King)—possibly polemically to some questions, as I was obliged to do to his, I hope that that will not cause any of us to overlook the fact that there should be one thing on which the whole House is united—that we must reject the establishment in Rhodesia of a régime based on the kind of principles which Mr. Smith outlined. I hope that that is common ground with all of us.

Sir Knox Cunningham: Could the right hon. Gentleman say what the realistic future will be, if—as I would regret deeply—Rhodesia becomes a republic and is then recognised by other countries? Does he mean that we will go on imposing sanctions in the 1980s and the 1990s? Where is the end of it?

Mr. Stewart: There is no sign whatever of any other country desiring to recognise this régime and I trust that nothing will be said in the House which would encourage any other country to do so.

Mr. Winnick: Does not my right hon. Friend agree that the latest news shows the complete futility of any British Government trying to reach an honourable settlement with the Rhodesian Front leaders? As all that is now being proposed in Rhodesia is totally meaningless and illegal, is it the intention of the British Government to press at the United Nations for stiffer sanctions against the illegal régime?

Mr. Stewart: I must leave the second question until we know the results of the referendum.
As for the futility of trying to seek an honourable settlement, I think that we were right to try to seek such a settlement. While there was any chance whatever of its being sought, I was most anxious that nobody should be able to say that the chance of an honourable settlement was thrown away by any unnecessary inflexibility on our part. I believe that that must now be clear to anyone who has studied the matter.

Sir C. Osborne: As a settlement with Mr. Smith now seems to be impossible, have the Government considered trying to contact business, financial and farmer leaders in Rhodesia to see whether there is another point of view which may be held by the responsible people in that country? Before the right hon. Gentleman agrees to the stiffer sanctions that may be demanded, will he tell the House roughly what they would cost?

Mr. Stewart: At this stage the latter question is entirely hypothetical. We are aware that there are other points of view in Rhodesia and, as I have explained to the House in answers to earlier questions, it happens quite frequently that people from Rhodesia come here and we have discussed with them and heard their views, and this will continue.

GOVERNMENT PUBLICATIONS (SUPPLY)

The Chief Secretary to the Treasury (Mr. John Diamond): With your permis-

sion, Mr. Speaker, and that of the House, I wish to make a statement about the supply of Government publications to Parliament and members of the public.
There was a delay this morning in the supply of papers to the House. This delay arose from a ban on overtime by engineers working in St. Stephen's Press. A pay claim by employees working in the Press is at present the subject of negotiations and I am sure that the House will understand that I am not, at present, in a position to say more.
At the same time, considerable inconvenience is being caused to hon. Members and to the public by the continuing strike at the publications warehouse of Her Majesty's Stationery Office. Recently, Ministers saw representatives from the chapel and the London central branch of the union concerned, S.O.G.A.T., to discuss the dispute which is about a control formula in a pay and productivity agreement.
An offer was made to the union representatives that the disputed clause should be the subject of arbitration, but I regret that this offer was rejected.
As there has been no further progress, we have decided to set up an inquiry forthwith to look into this dispute.

Mr. Maudling: I do not want to comment on the merits of the dispute, but may we be clear on one thing—that the Government must not invite the House to take business for which adequate documentation is not available? The Leader of the House is present. May we have a complete and clear assurance that those responsible will not put Government business before the House without adequate papers for that purpose?

Mr. Diamond: I can give a clear "Yes" to that question.

Mr. Turton: Although this situation is unprecedented, should not the Chief Secretary have a plan for emergency preparations of papers so that hon. Members are enabled to do their duty, as they were not able to do this morning?

Mr. Diamond: I entirely accept what the right hon. Gentleman has said.

Mr. Temple: Is the Chief Secretary aware that I endeavoured to put a Private Notice Question to the Leader of the House on this subject today and—

Mr. Speaker: The hon. Gentleman must not speak about the subject of a Private Notice Question which has been refused.

Mr. Temple: I was extremely exercised that I and other hon. Members were not receiving our papers as regularly as we should.
Is the right hon. Gentleman aware that even such documents as the Report of the Northumberland Committee, which was published some weeks ago, are still not available to hon. Members? Are not these disputes a disgrace and are they not causing disruption of Parliamentary business in the same way that industrial disputes are paralysing industry?

Mr. Diamond: I have already said that I am very conscious of the inconvenience caused to hon. Members and, with respect to hon. Members, the greater inconvenience caused to the public. I take a serious view of it and we are doing everything we can to put an end to that inconvenience.

Dr. David Kerr: Will my right hon. Friend note that to some of us this latest inconvenience is merely a manifestation of the growing dissatisfaction at all levels of the staff who attempt to serve us so well in the House for such inadequate reward? Will not my right hon. Friend extend the inquiry which he proposes to set up to take in the whole problem of salaries and conditions of work involving all employees working within the curtilage of the Palace of Westminster?

Mr. Diamond: In point of fact, that is not the case. The problem with the Press to which I referred is a national and not a local problem, concerned with the relativity of pay between two different classes of worker.

Mr. Lubbock: What machinery exists for resolving disputes of this kind? When interpretation of a clause in an agreement is a matter of argument between the employers and S.O.G.A.T., is there provision for automatic arbitration? Will the right hon. Gentleman place a copy of the agreement in the Library, so that we may study it?

Mr. Diamond: There is no provision for automatic arbitration. As I have said, arbitration was suggested but refused. I have, therefore, done the only

thing left to me, which is to set up an immediate inquiry.

Mr. Higgins: The Chief Secretary gave a clear "Yes" to the question of my right hon. Friend the Member for Barnet (Mr. Maudling). Will the Purchase Tax Act, 1963, crucial to today's discussion of Amendments to the Finance Bill, be available in the Vote Office?

Mr. Diamond: I am sorry, but I am not able to answer that question.

Mr. Maudling: On a point of order. We had a clear assurance from the right hon. Gentleman that the Government would ensure that documentation was available. Now the Chief Secretary cannot answer my hon. Friend. Where do we stand on this?

Mr. Diamond: If I am not aware of the precise facts about precise documents, I am sorry, but I just cannot give the answer.
The hon. Member for Worthing (Mr. Higgins) referred to a 1963 publication. I naturally took the right hon. Gentleman's question to refer to new publications, to new matters coming before the House. The hon. Member was referring to a six-year-old publication. I am not saying that it is not relevant to today's business, but I am saying, as honestly and as openly as I can, that I am not aware whether it is available in the Vote Office. I will cause immediate inquiries to be made. I recognise that the House must not be unduly inconvenienced.

Mr. Maudling: The right hon. Gentleman has just assured us that the Government will not proceed with business unless the House has the necessary documents. He is now clearly departing from that assurance.

Mr. Diamond: I am causing immediate inquiries to be made. I have been asked a question of fact and the shortest way to answer it is to find out.

Mr. Shinwell: May we assume that if this dispute continues—and, personally, I deplore it and its effect—will the Government be unable to introduce the Industrial Relations Bill? If so, what would be the effect of that?

Mr. Diamond: As I have already said, my right hon. Friend may rest content that arrangements have been made


for new publications and the House will not be unduly inconvenienced.
I took the question of the right hon. Member for Barnet (Mr. Maudling) to refer precisely to new publications, because we are discussing a strike in a warehouse and difficulties related to the Press, two separate disputes, which relate mainly to new publications.

Later—

Sir T. Beamish: On a point of order. Are you able to tell the House, Mr. Speaker, what consideration has been given to the view that anything which seriously impedes the work of Parliament, over which you preside, may amount to a breach of privilege? It seems to me—

Mr. Speaker: Order. The hon. and gallant Gentleman will recall that that was raised as a matter of privilege some days ago. I ruled that it was not a prima facie breach of privilege. I hope that the hon. and gallant Gentleman will not formally raise it again.

DIVISION No. 215 (ERROR)

Sir G. Nabarro: On a point of order. I gave notice to your office earlier this afternoon, Mr. Speaker, that I wished to put this point of order to you immediately following the Treasury statement.
Last Wednesday, I was unavoidably absent from the House, honourably paired with the hon. Member for Bedwellty (Mr. Finch). However, my name appears in a Division list, No. 215, as having voted with the Government on the land betterment levy, thereby causing all my constituents and myself great distress.
As I was in Newcastle-upon-Tyne at 9.20 p.m. televising, and could not then have been in the House, would it be possible for you, Sir, in retrospection, to give orders for the matter to be remedied and my name taken off the Government voting list?

Mr. Speaker: I realise the gravity of the point which the hon. Gentleman raises; it is almost a Star Chamber matter. His remarks will be noted in HANSARD. He will be relieved of the responsibility of having voted in a way in which nobody in the House would imagine he would have voted.

CONCORDE AIRCRAFT

Mr. Brooks: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
the increase in the extramural development cost estimates of the Concorde and the need for more adequate parliamentary control over such expenditure.
I shall be very brief, Sir. The facts speak for themselves. It is obvious that Concorde has become a licence to spend money—taxpayers' money—on a most speculative and uncertain venture. Nothing could be more specific than the facts: an escalation over three years in gross terms of £280 million, on top of an escalation of £220 million between 1964 and 1966, and on top of an escalation of £100 million between 1962 and 1964—[Interruption.]

Mr. Speaker: Order. The hon. Gentleman is submitting to Mr. Speaker what he believes to be a serious point. I must hear him before I can rule.

Mr. Brooks: The figures which have been given to us this afternoon leave out of account altogether the very substantial costs, running into tens of millions of pounds, which themselves have substantially escalated, in intramural expenditure. We used to have a saying, "The sky is the limit." It would appear that Concorde long ago passed through the stratosphere.

Mr. Speaker: Order. The hon. Gentleman must not debate his submission or the points which he would wish to make if I were to grant his submission.

Mr. Brooks: The basic point which I would put to you, Sir, is that this involves a problem of parliamentary scrutiny, parliamentary surveillance and public accountability.
When we consider that, taking account of the charges imposed by devaluation and increased costs, there has been a net increase in the last three years of about £1 million per week or £140,000 per day, we can only wonder why we get so excited about teeth and spectacles.
It seems to me that this is a matter of great urgency. It may well be a unique


matter in view of the terms of the Concorde treaty. But we should know where we are going, and whether there is a ceiling on this expenditure and, if so, on what conditions.

Mr. Speaker: The hon. Gentleman was courteous enough to inform me this morning that, after listening to the replies of the Minister of Technology, he might seek to move the Adjournment of the House under Standing Order No. 9.
The hon. Gentleman asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
the increase in the extramural development cost estimates of the Concorde and the need for more adequate parliamentary control over such expenditure.
I listened carefully to the exchange at Question Time and to the hon. Gentleman's submission, and I have given careful consideration to all the points. But I must rule that his submission does not fall within the provisions of the revised Standing Order. Therefore, I cannot submit his application to the House.

COMPANIES

Sir Brandon Rhys Williams: I beg to move,
That leave be given to bring in a Bill to amend the law relating to companies so as to require that the agenda of annual general meetings shall include consideration of the appointment of shareholders' committees.
In view of the lateness of the hour, I shall try to make my remarks as brief as possible. The Bill I propose may fairly be described as a very small Bill. It involves no expense to the Government. It puts no added obligations on shareholders. It gives a further, but only limited, measure of protection to minority interests in public companies. Nevertheless, I believe that it is potentially important in bringing shareholders and managements into contact and, in due course, promoting efficiency in the working of joint stock companies.
If we are thinking of playing a game of cricket, we organise ourselves into teams of 11. If our object is to get together for the creation of wealth or the conduct of business, the normal practice is to organise ourselves into joint stock companies. The joint stock company is a device which has evolved over a great many years. Lord Goodman is perfectly right in saying that it constitutes one of the glories of the common law. But, unfortunately, the joint stock company can today be a very sick organism, and it is often found to be not in the best of health. The problem is that there is no automatic corrective within the joint stock company when things begin to go slightly wrong. I think that this is due to the virtual abdication of the shareholders.
There are a number of reasons wily shareholders find it difficult to keep in touch with the management of public companies. One is the increase in the absolute number of shareholders and of public companies. Another is the growing complexity and technical content of modern business problems. There is also the managerial revolution; and the almost universal adoption of limited liability. All these things are irreversible, but it is necessary to take special measures to correct their side-effects, which amount, really and truly, to the loss of shareholder supervision of management.
There are a number of forces working for discipline in public companies which are of value. One is the Press. But, with the best will in the world, the Press cannot supervise everything that happens in 10,000 public companies. There are the great institutions. But, quite rightly, they are normally afraid to become too closely entangled in disputes with management. There are also the take-over bidders; but their activity is generally more that of executioner than company doctor. I feel that it is necessary to bring in the shareholders in the very early stages of decay of the joint stock company.
But, obviously, we cannot have the entire body of shareholders tramping into the board room. This is why it is necessary to encourage the growth of shareholders' committees. I believe that a Bill which requires the consideration of the appointment of a shareholders' committee once a year is a reasonable beginning on the road. However, I would like to make one further provision, to deal with the situation that would arise if the committee appointed by the shareholders and the board should come to loggerheads—as might well happen, Provided that the committee has the support of not fewer than 200 members of the company, or 10 per cent. of the voting rights, and provided that it carries the majority of those voting at the meeting, it should have power to bring in a third party to conduct what is increasingly widely described as a "management audit". I would like, however, to propose still further safeguards to protect boards from irresponsible and tearaway elements among shareholders.
In connection with my following remarks, I think it only right that I should pay tribute to the Board of Trade, which has been exceptionally helpful in the advice that it has given me, and also to a number of experts in company law and practice who have guided me to the conclusions which I would like to incorporate in the Bill.
I think that the terms of reference of the management auditor should be settled by the shareholders' committee in the light of the particular circumstances of the company. It may be that the shareholders would want the management audit to be conducted into the whole

management of the business or, possibly, into certain aspects only—for example, marketing, works management, research or personnel practice. The person or firm retained to carry out the management audit and the fees payable should, however, be agreed by the board. In the event of disagreement between the committee and the board in these matters, the problems should be solved by reference to arbitration or, if necessary, to the Board of Trade.
The auditor should have power to examine papers and to interrogate staff, but not in any circumstances to disclose information beyond what is called for under existing company law—except, of course, to state to the shareholders whether, in his opinion, the board is conducting the business with prudence and competence and making the best use of the assets in the circumstances.
I believe that there is no shortage of men with the maturity and knowledge in the various fields in which they might be required to carry out the type of audit that I envisage. There are also, undoubtedly, already in existence firms of accountants and of consultants which have grown up and are able to provide a professional service of the sort which I foresee being called for. In this respect, it would be proper for me to declare a personal interest. I have been employed for a number of years by Management Selection Ltd., which is among the relatively quite large number of firms of consultants which would be able to provide the sort of service which a shareholders' committee might require.
I do not envisage that in any circumstances all the 10,000 public companies with a share capital which would be affected by the Bill would immediately start to set up shareholders' committees; nor do I think that a management audit would ever be instituted except as a rare event. Nevertheless, the fact that consideration of the appointment of a shareholders' committee would be on the agenda of every public company once a year would remind the board of the existence of the shareholders and would also make every annual general meeting an event of potential significance.

Mr. Hector Hughes: rose—

Mr. Speaker: Order. Does the hon. and learned Member wish to oppose the Bill?

Mr. Hughes: May I say a word on the Bill. Mr. Speaker?

Mr. Speaker: Order. I have asked the hon. and learned Member a question. He may not say a word unless he wishes to oppose the Bill.

Mr. Hughes: No. I do not wish to oppose it, Mr. Speaker. I think that it is a step in the right direction.

Mr. Speaker: If the hon. and learned Member thinks that it is a step in the right direction, he must sit down and be quiet.

Question put and agreed to.

Bill ordered to be brought in by Sir Brandon Rhys Williams, Mr. Alison, Mr. Bruce-Gardyne, Mr. Crouch, Mr. du Cann, Mr. Grant. Mr. Lane, Mr. Maurice Macmillan, and Mr. John Smith.

COMPANIES BILL

Bill to amend the law relating to companies so as to require that the agenda of annual general meetings shall include consideration of the appointment of shareholders' committees, presented accordingly, and read the First time; to be read a Second time on Friday, 13th June, and to be printed [Bill 166].

Orders of the Day — FINANCE BILL

(Clauses 7, 8, 36, 38, 43 and 44, and Schedule 6)

Considered in Committee [Progress, 20th May].

[Mr. SYDNEY IRVING in the Chair]

Clause 44

SELECTIVE EMPLOYMENT PAYMENTS

4.35 p.m.

Mr. Terence L. Higgins: I beg to move Amendment No. 92, in page 64, line 9, at end insert:
(12) Where an employer has paid selective employment tax for any contribution week beginning on or after 7th July 1969 in respect of a full-time worker employed solely in the gaining of exports and it is shown to the satisfaction of the Secretary of State for Social Security that throughout that week that person was so employed the Secretary of State shall make to that employer in respect of that person and that week a refund equal to the tax paid.

The Chairman: With this Amendment, we may discuss also the following Amendments:
Amendment No. 91, in line 9, at end insert:
(12) Where an employer has paid selective employment tax for any contribution week beginning on or after 7th July 1969 in respect of a full-time worker employed on the staff of a consulting engineer exclusively engaged on overseas projects the Secretary of State for Social Security shall make to that employer in respect of that person and that week a payment of an amount equal to the tax paid.
Amendment No. 93, in line 9, at end insert:
(12) Where an employer has paid selective employment tax for any contribution week beginning on or after 7th July 1969 in respect of an employee who is wholly or partly occupied in the provision of services in connection with the export of goods by such employer on his own behalf or on behalf of another or in the obtaining of earnings from overseas the appropriate Minister shall make to that employer in respect of that employee and that week a payment of

(i) in the case of an employee wholly occupied in such activity an amount equal to the tax paid; and
(ii) in the case of an employee partly occupied in such activity such amount of the tax paid as is proportionate to the time so occupied:



Provided that when the activities in which a group of employees are engaged are only partly in the provision of such export services or in the obtaining of overseas earnings the appropriate Minister may fix the amount of the repayment in respect of such employees by reference to the relation of the total exports or overseas earnings to the total turnover or earnings of the employer.
Amendment No. 110, in line 9, at end insert:
(12) Where any consulting engineer has paid selective employment tax in respect of any employee engaged on drawing office work concerning overseas projects during any week after this clause comes into operation that employer shall be entitled to a refund of that tax for that person for that week.
Although the requirements of procedure have dropped off Amendment No. 82—in page 64, line 9, at end insert:
(12) Where an employer has paid selective employment tax for any contribution week beginning on or after 7th July, 1969 in respect of a person employed in the business of consulting engineering and working exclusively on overseas projects, the Secretary of State for Social Services shall make to that employer in respect of that person and that week a payment of an amount equal to the tax paid.
—because we have reached Amendment No. 90, I still propose to allow Amendment No. 82 to be included in this selection of Amendments.

Mr. Higgins: Thank you, Mr. Irving.
Amendment No. 92 is concerned with giving relief effectively against selective employment tax to full-time workers employed solely in the gaining of exports. We are grateful to you for linking with it the other Amendments, particularly No. 91, which is concerned with giving relief from S.E.T. to those who are employed on the staff of consulting engineers exclusively engaged on overseas projects.
An Amendment similar to this one was moved in Committee on the Finance Bill upstairs last year, when my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) brought this matter forward a few moments before the Guillotine which was to restrict the debate fell. None the less, we had a useful debate, albeit short, in which my right hon. Friend stressed that the imposition of S.E.T. on those who were engaged in encouraging exports was clearly contrary to the avowed policy of the Chancellor of the Exchequer of that time. I would think that it is even more clearly against the policy of the Chancellor as put for-

ward in his latest Budget speech. Therefore, we take the view that the Amendment is one which the Government should welcome.
I appreciate that the wording of the Amendment may not necessarily be perfect, but it is the overall principle which we wish to bring forward. We dispute the arguments which the Government employed in rejecting our similar Amendment last year. If we are to be successful in selling our exports, it is surely crucial that the marketing process should be efficient. Unless that is so, we cannot hope to promote our exports overseas. I certainly dispute the view, expressed by the Chancellor, that the effects of devaluation in encouraging exports still amount to 7 per cent. on a price or profit differential.
I enumerated in my speech on the Budget—I will not weary the Committee with the matter again—the action which the Government have taken which has, I believe, eroded away almost entirely any value which exporters may have obtained from devaluation. Since that time we have had further increases in costs and in inflation and we are now debating further increases in the selective employment tax. It has become clearer than it was at that time that the imposition of further payments for pensions contributions will impose a further burden on those who are exporting. Therefore, it is surely extremely important that as far as possible, we should do everything we can to encourage exports. It is absurd that we should tax those who are engaged in trying to promote exports.
I should like to take three brief examples to demonstrate how this works. The first is the question of those who employ people engaged wholly in promoting exports within a larger concern. Hon. Members may have noticed in The Times of, I think, 19th April, a letter from the managing director of Dexion Limited, who pointed out that the public as a whole did not appreciate that firms, such as the one of which he was managing director, actually have to pay selective employment tax on those members of their staff—for example, export salesmen and the shipping department—who are engaged in promoting their sales overseas. He points out that the company with which he was concerned, which last year earned £3,400,000 in foreign currency


from exports and overseas trading, paid over £40,000 in taxation on those who were engaged in promoting those exports. This surely is a ludicrous situation.
To take the reciprocal of that argument, many firms and individuals are engaged in this country as buying houses or buying agents for companies overseas; for example, large department stores in the United States or in Australia. Selective employment tax must be paid on this staff although they are entirely engaged on behalf of companies overseas in encouraging United Kingdom firms to export to them. It is ludicrous that a tax should be imposed on such people who are doing work which benefits specfically and explicitly our balance of payments.
Various other groups are affected in this way, even although they do not come in the service category which I have just mentioned. One group of people who fall within the wording of the Amendment in that they are employed purely on the gaining of exports, are those employed in television companies, either commercial companies or the B.B.C., who are concerned with producing exports of television programmes.
The odd thing about this situation is that in one sense they are manufacturing a physical article, and one would, therefore, expect that they would be exempt from S.E.T. The television programmes are recorded on video tape, which is then exported to overseas markets, with the result that substantial sums of foreign exchange accrue to this country.
One would have expected this process to be automatically exempt as a manufacturing process, but, because of the absurd operation of the Standard Industrial Classification, either in its old form or in its new form which the Clause now proposes to employ, and because it was not designed for the purposes of S.E.T., the television industry pays S.E.T. on the people who are engaged in producing a physical product, which embodies many services necessary to produce the television programme, in addition to the many other burdens imposed upon it.
The tax is imposed after the overall profit position has been determined in negotiation with the Government. We hope, therefore, that the Government will exempt those who are engaged in producing

television programmes which are subsequently exported and which go to improve our balance of payments position.
The other absurdity is that the Government have recognised the strength of this case in the production of ordinary films in ordinary film studios. The result is that if films are produced in a film studio and subsequently exported, S.E.T. is not paid, but if films are produced for a television programme on video tape instead of on ordinary film, S.E.T. must be paid on those engaged in the operation.
This is clearly an area where the Government have made a mistake. They can perhaps put it right, and I hope that the Chief Secretary will give an assurance that a suitable Amendment will be put down on Report. He will appreciate that it is difficult for us to draft an Amendment in specific terms to cover the entire area of commercial and B.B.C television.
4.45 p.m.
I know that many of my hon. Friends are more expert in this area than I am, so I will do no more than mention Amendment No. 91, which is one of several Amendments concerned with consulting engineers. The point here is that S.E.T. has to be paid on consulting engineers who are operating exclusively on work in the overseas market. It might be argued that S.E.T. should not be paid even if they are only partially engaged in the overseas market, but the Amendment is moderate and straightforward in that respect.
I hope that the Government will give an assurance and perhaps even deal with this point more widely than the Amendment does. Selective employment tax is putting consulting engineers in British firms at about a 5 per cent. disadvantage at present rates. This is a sufficient margin to result in their losing out in the overseas market because the margin on which such firms operate is necessarily very competitive and not large.
This is a growth market overseas, and the extent to which British consulting engineers overseas have raised the capital value of overseas works since 1964 has been substantial; an increase from £950 million in 1964 to £1,638 million last year. This is a substantial increase in an expanding market which one would


have thought the Chancellor of the Exchequer would wish to encourage if he seeks to put our balance of payments position into equilibrium, or to get the surplus which he maintains he will still achieve, even though it will be somewhat later than he orginally hoped.
The direct contribution of consulting engineers working on overseas projects is approximately £18 million per annum; yet they are being penalised by S.E.T. to the extent of about £640,000 per annum. This is not merely losing us invisible earnings, but is deterring many people overseas from buying British goods. People employing British consulting engineers would also buy physical assets which were British and physical capital goods which were British.
The case is overwhelming. We are not satisfied with the explanation given last year by the Financial Secretary that this is an area where we run into problems with G.A.T.T. and E.F.T.A. agreements. No one is more anxious than I not to set off a protectionist war in world trade, but in many areas reasonable arrangements could be made about the payment of S.E.T. which were not contrary to international agreements. Whereas value-added tax can be rebated, S.E.T. cannot, and that is a basic flaw in S.E.T., but, even so, the imposition of the tax on this area seems to be determined not by our international agreements, but by the idiosyncratic way in which the Standard Industrial Classification places people on one side of the line or the other. If films can be on the right side of the line, there should be no difficulty in video tape being on the right side of the line.
I hope that the Committee will accept the Amendments, because, although there may be arguments in individual G.A.T.T. or E.F.T.A. agreements, these do not run to our invisible exports which make such an important contribution to our balance of payments.

Mr. W. Howie: I propose to take up some of the points made by the hon. Member for Worthing (Mr. Higgins) because I, too, have tabled an Amendment dealing with consulting engineers. It is in somewhat different terms from the hon. Gentleman's Amendment. I drafted it myself, and on looking through the Amendments on S.E.T. I see that my Amendment is unique.

I do not claim, therefore, that it is better; I merely claim that it is different.
For the encouragement of my right hon. Friends on the Front Bench, I preface my remarks by saying that I entirely approve of S.E.T., or almost entirely. I think that it is an excellent tax, for three reasons.

Mr. Patrick Jenkin: It is not only his Amendment but the hon. Gentleman himself who is unique.

Mr. Howie: I have only just started and my uniqueness will become the more apparent as I go on. I am encouraged by the hon. Gentleman's praiseworthy intervention, but it shows most unusual impatience on his part. He usually waits until the argument has been started before he gets excited.
My first reason for liking S.E.T. is one which should appeal to hon. Gentlemen opposite. It is that this tax raises a large sum of money for a very small outlay. It is, therefore, a very profitable tax, and on profit-making grounds alone I find it extremely desirable. It is also, in theory at any rate, an infinitely flexible tax. I am not sure that it has as yet been used sufficiently flexibly by my right hon. Friends, but it is that very flexibility which I hope to prompt them into exercising in respect of the consulting engineering profession.
I do not support the hon. Member for Worthing in his general demand for exemption in connection with exports. As a consulting engineer, I am not strongly inclined to link my profession with that of the manufacturers of television films. They are no doubt excellent people in their own way, but the kind of service which they provide for society is of a totally different order from the kind of service which consulting engineering provides for society. When I talk about service, I am talking about service in the general humanitarian sense of the word, not in terms of a service industry as it is thought of in terms of S.E.T. I do not regard the consulting engineering profession as a service industry in the terms of this Bill at all.
I shall not attempt to rehearse all the arguments. They were laid out strongly enough yesterday by my hon. Friend the


Member for Liverpool, Walton (Mr. Heffer) when he talked about the building industry, and what he said then applies to the consulting engineering industry today, which includes builders and engineers.
In my Amendment the people in whom I am principally interested are the drawing office staffs, the technologists of the consulting engineering world. I am not so much concerned with the peripheral people employed by consulting engineers to look after the filing, to do the typing, and so on. I am concentrating on the technologists, the engineers, and the draughtsmen. It is their work which should be excluded in so far as it relates to exports.
Drawing office staffs are an integral part of the chain of production, and to call them anything else is quite wrong. This error arose originally from the crudity of the classifications upon which S.E.T. is based. We know that certain exemptions have been made. As I recollect it, if a drawing office is attached to a manufacturing establishment it is exempt, whereas if it is along Victoria Street it is not, and yet the draughtsmen may be doing the same kind of work and using the same kind of drawing boards and pencils. This is an anomaly which is too great to be borne reasonably.
I am asking for exemption in respect of people engaged on overseas work. I am being very modest in my demands. I know that the Government are beset with problems on both sides, and I do not wish to add to annoy them. I am not asking that all technologists should be excluded, only those who are engaged on export work. I am inclined to quibble a little with the Opposition Amendment, but the fault may be mine. I know that the hon. Member for Worthing is meticulous in these matters, and he is at least as likely as I am to be right in understanding his own Amendment, possibly more so.
I rather got the notion that the hon. Gentleman was under the impression that odd bodies of consulting engineers were devoting themselves exclusively to export work. This is not quite the case. It is much more complicated than that. There is a substantial body of consulting engineers whose work is partly for the home market and partly for exports. In addition,

individual employees may find that their time is devoted partly to overseas work and partly to work for the home market. I realise that I am quibbling with the hon. Gentleman at this point. I am merely suggesting that his Amendment is perhaps rather more blunt than he really means it to be, though I support the general tenor and the thought behind his Amendment.
I am asking for exemption for these very important exporters because of the importance of our export problem. We debate this problem day after day and week after week in this House. No one would say that our export performance, even since devaluation, is as good as we would desire. No doubt our exports have greatly improved compared with what they were, but we can all agree that improvements can still be made and that we should be doing everything we can through legislation to promote those exports. This is a small way in which we can help.
The hon. Member for Worthing gave us some figures. He showed that the total capital value of work done overseas by British consulting engineers amounted to £1,600 million, an increase of nearly 100 per cent. since 1964. It produces a substantial sum in the form of invisible exports, amounting to about £18 million a year, and this is by no means a sum which we can laugh off.
In addition, this work puts Britain and British engineering into a large and expanding market in the world. When British consulting engineers are working overseas, two things seem to follow. First, British engineering goods are bought because the engineer concerned naturally hopes that the capital goods which he is designing will be exported from Britain, and very often they are.
But there is another factor in this. A British consulting engineer working abroad establishes a very useful connection with foreign engineers, not merely established engineers but young ones, of whom substantial numbers are coming forward from the expanding parts of the world, the Middle East and so on. If British consulting engineers work hard overseas, we draw into what one might call the British technological sphere of influence a large body of foreign engineers who become orientated towards


British engineering and British-manufactured engineering goods. That is not something which we can show in the balance of payments accounts or argue about when dealing with these matters. It is an intangible which in my opinion shows a great promise for the future for British engineering.
5 p.m.
I have said that the Government are very anxious that we should encourage exports. I believe that the hon. Member for Worthing said that a British consulting engineer finds that S.E.T. places him at a price disadvantage of about 5 per cent. as compared with foreign competitors, when he is seeking work abroad. Five per cent. can be a very crucial margin in seeking that work. In trying to encourage exports the Government have gone as far as setting up a special bureau to encourage consulting engineers to work overseas and to draw into that work many British consulting engineers who have never done it before. Yet S.E.T. remains as a burden and an impediment to them.
I do not think that there would be any administrative difficulty in allowing this exemption. A slight complication might arise from the fact that engineers would be dividing their work between the home market and overseas markets, but that difficulty would not be impossible to overcome. The cost to the Exchequer would not be significant. If this exemption were allowed the loss to the Exchequer would be about £640,000 out of a total yield of £600 million from this tax.

Mr. Laurence Pavitt: It is £630 million.

Mr. Howie: It would be £640,000 out of a total of £630 million. The loss to the Exchequer would be insignificant—certainly compared to the gain that would be derived.
I have asked the Chancellor to be flexible in the use of this tax. He has shown some flexibility in the past, notably in respect of the hotel industry. I am asking him to show flexibility in this respect and to consider, at a later stage, allowing an exemption for consulting engineers to the extent that their staff are engaged in overseas work and are producing invisible exports.

Mr. Tom Boardman: I am not sure from his remarks whether the hon. Member for Luton (Mr. Howie) was in favour of S.E.T. in general and opposed to it in principle—the principle being any interest of which he had some knowledge. His remarks on that point would apply to almost any aspect of the service industries of which each of us has some knowledge. There is common ground between hon. Members on both sides on one point: we both wish to increase exports. But the Government do not begin to know what is necessary to create exports. It is not just a question of the manufacturing process. That is vital, but in many ways it is the easiest part of the process. First, it needs, market research. It needs people in overseas countries discovering what is required. We need the selling people. There is a great task for export salesmen, and there are the questions of transportation, documentation, credit arrangements, after-sales services, P.R.O.s and all the other factors that go to make up the export sales that appear in our balance of payments.
Some large vertical firms can do all this by themselves. If they are clever enough to position their people in the right places so that they have the right percentage in the right sites where the factories exist, all these services can be provided by one firm, which then receives a refund from S.E.T. The majority of firms, however, need the help of other firms of export agents, merchant bankers, shippers and insurers. It is these smaller firms to which my Amendment refers—those which are wholly or partly engaged in overseas earnings.
I draw the Chief Secretary's attention to some figures with which he is probably familiar. The British Export Houses Association is collectively responsible for about £1,000 million worth of exports a year. All its members are paying S.E.T. The Overseas Marketing Corporation rightly pays S.E.T. in respect of its staff. I say "rightly" because it would be wrong to put it in a different category from the British Export Houses Association and many similar export firms. But it exposes the farce that corporations of that kind, established to promote exports, have this additional penalty put round their necks. The people doing these jobs


are no less important than those engaged in factories, yet they all pay S.E.T.
On many occasions the Prime Minister has referred to candyfloss. He seems to have an irrational dislike of it. He may have an irrational dislike of many things, but the development of that argument, namely, that the candyfloss manufacturer shall have immunity whereas people engaged in the promotion of exports shall pay the tax, is candy-floss logic of the worst kind. It is so much nonsense when the bulk of our manufacturing, in respect of which a refund is paid, goes to home consumption. The Amendments that we are discussing all cover people who are engaged in exports. It is a nonsense that they should have to pay the tax while manufacturers for home consumption do not.
My Amendment goes rather further than that of my right hon. Friend the Member for Enfield, West (Mr. Macleod). My Amendment seeks to cover those who are not only wholly engaged but partly engaged in exports. We have also covered those who are engaged in obtaining overseas earnings. The drafting of the Amendment is amateurish, and I do not doubt that the Chief Secretary would be able to find a number of holes in it. Nevertheless, I hope that we shall have his support for its principle.
It has been suggested in similar debates in other years that such an Amendment would be an infringement of G.A.T.T. or the E.F.T.A. Convention. I find it difficult to accept that, but if it is so it merely emphasises the folly of imposing this tax on people who are engaged in export industries. The Government now have an opportunity to show that they wish to help the exporters. We have had a lot of lip service to the idea; the acid test is whether the Government are prepared to do something about it, and about those who are engaged in invisible exports. The figures show that £3 out of £8 of our exports come from invisibles—from merchant banks, insurers, and so on. Tributes have often been paid to the City, and these normally provoke sneers from hon. Members opposite. But I hope that hon. Members will bear those figures in mind—£3 out of every £8 comes from institutions referred to collectively as "the City". These are the people who are being penalised, and our Amendment would

provide a formula for them to have a refund.
Of course there are administrative problems, but to anyone who has devised the present system of S.E.T.—the division between those who pay, those who are refunded and those who used to be paid—the problem of separating those engaged in exports from those who are not will be child's play—

The Chief Secretary to the Treasury (Mr. John Diamond): indicated dissent.

Mr. Boardman: The right hon. Gentleman shakes his head, but if he gave thought to the problems in the present tax and then to the comparatively simple way in which this rebate could be given, he would find that it is child's play.
We have inserted a proviso to try to achieve a global effect by setting the amount to be refunded in proportion to the overseas activity of the firm concerned. This may need careful redrafting to avoid the G.A.T.T. and E.F.T.A. Conventions, but it is the principle which is at stake, Some such proviso would provide some rough justice, but it would at least be justice instead of the smooth talking injustice of the present system.
The Amendment provides for those partially as well as wholly employed on overseas work. This also may present some administrative difficulties, but the present situation is a complete farce. If 51 per cent. of employees are engaged in manufacturing, the whole lot are exempt, but if only 49 per cent. are so engaged, none of them does. Also, one must be careful to site one's office on the right side of the road and to see that offices fit into the pattern which allows firms to reduce their S.E.T. liability by the maximum amount. The ridiculous state of the present application would, as I said, make the devising of a system of rebate along these lines appear child's play.
The Government have an opportunity here to make a small gesture to our exporters. After all the letters of intent, let us at least have a message of intent in this direction. Let the Government with their dying gasp, show that if they cannot initiate anything sensible at least they can still listen to reason.

Mr. A. P. Costain: I support this Amendment and


associate myself with the two Amendments which are being discussed with it. The hon. Member for Luton (Mr. Howie) referred to consulting engineers, who have a strong case. I must declare an interest. I am in the contracting profession, and we have interests in consulting and in the work of architects. I was surprised that the hon. Member referred only to consulting engineers, since nothing in his argument could not apply also to architects. I assume that, should the Government accept his Amendment—

Mr. Howie: I referred only to consulting engineers because that is what my Amendment is about, and I am like that.

Mr. Costain: I appreciate that the hon. Gentleman is like that. I should not like to suggest that he referred only to consulting engineers because he was a consulting engineer and not an architect.
What we are talking about are the invisible exports. Few people realise that, over 175 years, in only five or seven years have we had a balance of payments surplus on our ordinary exports, so our invisibles are some of the most important factors in our balance of payments.
5.15 p.m.
I would draw attention particularly to the work of those who produce know-how—the consulting engineers, architects, structural and constructing engineers. It shows the absurdity of this tax that anyone who manufactures a plant or design is considered to be in a service industry, whereas anyone who produces candy-floss is manufacturing. There is a strong case for supporting the consultants and those with know-how.
The hon. Member for Luton weakened his case—we will put that right in a moment—by saying that there was some difficulty over deciding which staff in the offices were working on overseas work alone. Another hon. Member suggested that all consulting engineers worked at home and overseas. I dissented at the time because I can quote one or two who work exclusively overseas, specialising in such work as pipelines.
If the Chief Secretary intends to quote the absurd argument—it is the only possible one that I can see—of the difficulty

of checking, he should remember that even the Treasury has faith in audited certificates; even the Treasury agrees to employ management consultants and to pay them on the basis of time worked. The Treasury has agreed that, for repayment of investment grants, it will take an audited certificate as proof of what has been paid or the work that has been done. Therefore, unless they think that every consulting engineer, architect and professional man is an out-and-out crook, and clever enough to swindle the Treasury, there will be no difficulty in separating these activities. There is a strong case for exempting from S.E.T. all the know-how of these people, but that would be outside the Amendment.
I want to draw particular attention to the advantage of giving these people an incentive to get overseas work. I must declare another interest, in that I sit on the Council of the Export Group for the Constructional Industries. This week, we are about to publish an interesting document showing what consulting engineers and architects have done for exports. We have been honoured by a letter on Board of Trade stationery from no less an individual than the President of the Board of Trade himself. I am sorry that he is not here to convince the Treasury of the weight of our argument, but, in this letter, he says:
By any standards the great diversity of projects undertaken and the international scale on which it operates put the British constructional industry amongst the foremost in the world. The industry has played a conspicuous part in meeting the demands of the developing countries for infrastructure projects and at the same time supplying overseas countries generally with projects ranging from public buildings of all kinds to the most sophisticated and technologically advanced industrial plants.
I greatly welcome this illustrated publication by the Export Group for the Constructional Industries which will provide potential overseas buyers, whether in the public or private sector, with valuable information about the British constructional industry. The relations between Government and that industry are very close and will become even closer following establishment in the Board of Trade of a focal point to co-ordinate the diverse Governmental activities bearing on the industry's approach to projects overseas.
I hope that there will be co-ordination and that, if the Government really wish to increase exports, they will get some sense into S.E.T.
I fear that the effect of not accepting the Amendment will be that consulting engineers engaged on overseas work will decide to do the detailed designing of that work abroad. After all, they will not only not have to pay S.E.T., but will avoid the other taxes which the Government have imposed. I know from experience of at least one firm of architects which was doing a large amount of work in the Middle East who got so fed up with the imposition of taxes in Britain that it opened an office in Cyprus and is now operating from there. We see that the Government are not only losing S.E.T., but are losing considerable amounts in income tax and surtax. This illustrates the small-mindedness and short-sightedness of the Government.
We must not overlook the fact that when consulting engineers design work in this country for overseas clients they normally, though not to the extent that this is done by some foreign consulting engineers, specify the use of British products. I am thinking not only of structural steel and heavy machinery, but even things like sheets for hotels.
My hon. Friend the Member for Worthing (Mr. Higgins) quoted some interesting figures. Mine may be a little more up to date because I obtained them this morning from the British Consultants' Bureau. I am assured that there are 1,500 projects under way, 1,000 of them by consulting engineers and 500 by architects and management consultants. The work is worth about £1,800 million. We should not forget that the fees are worth about £20 million. While the President of the Board of Trade explains the importance of this work in a prefix to a new book, the Government take the view that because these people are successful they must be heavily taxed.
Because a number of my hon. Friends wish to speak I will be brief. Basically, we must agree that someone who manufactures a plan or design is manufacturing an article. I will resist the temptation to show how absurd it is that S.E.T. should be paid by the building industry, since the hon. Member for Liverpool, Walton (Mr. Hefter) dealt admirably with this point yesterday. It is indefensible that a person who manufactures a plan should be considered to be manufacturing something else. It is indefensible that those who are

helping our exports and are, at the same time, increasing the exports of other industries as a by-product of their efforts, should be treated in this way. If the Treasury has any interest in improving our balance of payments it has a chance to do so by accepting the Amendment.

Mr. Cyril Bence: I support the proposals of my hon. Friend the Member for Luton (Mr. Howie), although while he likes the idea of S.E.T., I am not at all partial to it. As an engineer, I find it difficult, in a complex industry such as that in which I served for many years, to separate service from manufacturing activities. Indeed, in my profession it is virtually impossible to divide the industry up into the two concepts because in, for example, the servicing of machines, everybody engaged in that work is performing a service.
I support my hon. Friend because in Britain today we are engaged in a process which may last for a decade or more. We are transforming many of our out-of-date industries into modern, viable ones. In many instances we can achieve a higher conversion value in terms of final output between raw materials and products.
When a vast investment programme in a big engineering plant is undertaken, outside consulting engineers are frequently called in. They are often able, after considering the layout and techniques required to speed production, to bring an analysis to the problem which those who are engaged in the plant may not be able to produce. This often occurs simply because those who have spent many years in a plant are not able to take as objective a view as an outside consulting engineer. The engineering industry is aware that the outside consultant can often represent the most economic way of redeveloping a plant. For this reason, my hon. Friend the Member for Luton has a good case in calling for the exemption of consulting engineers from S.E.T.
During the war the consulting engineer showed what a valuable contribution he could make to industry. His services were readily called on at that time, as they were in the post-war period when industry had to transfer to peacetime production to compete in the markets of the world.
With my experience of engineering, I assure my right hon. Friend the Chief


Secretary that it is virtually impossible to split engineering activities into export and non-export divisions. The majority of engineers work on both types of project and one cannot say what percentage of their time is spent on producing goods for the home market as against producing goods for abroad. For example, if I were tooling up to produce a large commercial lorry to convey goods from Birmingham to the London docks where they were to be shipped to the United States, I would not be sure if I were producing something for export or for home consumption.
For this reason, I prefer the concept of a payroll tax right across the board.

[Dr. A. D. D. BROUGHTON in the Chair]

Mr. John M. Temple: Even the Government are appreciating the extraordinarily valuable contribution which invisible earnings make to our exports. Whereas I should like to support the Amendment which was so ably moved by my hon. Friend the Member for Worthing (Mr. Higgins), I am inclined to give greater support for the more flexible proposal made by my hon. Friend the Member for Leicester, South-West (Mr. Tom Boardman) because the Amendment standing in his name recognises the difficulty involved in saying that a worker is employed only on exports and that some of his time is not devoted to work concerned with home consumption.
I have had the good fortune to travel abroad a considerable amount in recent years. Last year I was in Lima, Peru, on a Parliamentary conference. I had lunch with one of our leading insurance men who, to my surprise, told me that the Peruvian fishing industry was the largest in the world and that its vessels were insured in the London markets. Those who know about insurance matters appreciate that in the London market it is impossible, when dealing with the servicing of insurance business from overseas, to separate what is being done for overseas clients from the work being done for clients in this country. I maintain that it would be comparatively easy for an accountant to certify approximately the proportions of work being done for customers overseas and for business within this country.
5.30 p.m.
The Chief Secretary, in a former existence, was a professional man, and will recognise that tax inspectors today have to settle big claims with accountants. It is often a matter of what to do at the end of the day. The tax inspector says that the amount should be so much, the accountant says that his estimate puts the figure slightly lower, and in the end they split the difference. My point is that today the Revenue and accountants are used to "horse trading" in these matters, and they could quite easily fix the proportions in which a certain firm was dealing with the home and the export markets.
I can quote another example from the insurance world. Only the other day I came across a foreign international airline, 95 per cent. of whose reinsurance was placed in the London market, yet the employers of those workers in the London market have to pay the full contribution to selective employment tax.
My hon. Friend the Member for Folkestone and Hythe (Mr. Costain), and one or two hon. Members opposite, have spoken particularly about consulting engineers. In my constituency we have a number of very important architects who do a great deal of work for customers overseas, advising on the building of hospitals, universities and schools. The Amendment in the name of my hon. Friend the Member for Leicester, South-West would cover just such a situation. It is not only the architectural work which is so important, but the fact that once a plan drawn in this country has been accepted, much of the capital equipment for the project, which will be supplied by manufacturing firms not subject to selective employment tax will follow the initial plans drawn up and approved in architects' offices here.
I pass on to a slightly different but in a way a related topic—the agricultural industry. In a few weeks' time, one of my privileges will be to assist with the international pavilion at the Royal Agricultural Show at Stoneleigh. The whole object of that pavilion is to welcome visitors from overseas in the hope that they may become purchasers of our livestock and equipment. The pavilion will be staffed entirely by people for whom the society will have to pay selective employment tax. Whilst it would be impossible


to prove that one or two home buyers had not gone into the pavilion during that week, the society would be able to prove that a very high proportion of the staff employed there were devoting their efforts entirely to generating export business. Yet it is for those employees that the tax will have to be paid.
Our livestock export business is growing fairly fast. Here I must declare a personal interest. In about a week's time, animals from my farm will go to Libya. In the last few years, animals from my farm have gone to the Middle East and to Spain. I know that the farming industry is in the neutral zone, but what about the livestock export companies and the breed societies? The breed societies have large parts of their organisations devoted entirely to getting statistics of the performance of the animals to be sold so that overseas buyers can have confidence in those animals. The work of the livestock export companies is entirely devoted to the shipping and general sales arrangements in respect of these animals for overseas countries. This is an aspect of the incidence of the selective employment tax which has been very much overlooked by the Government, yet these services industries are vital to the sales of our capital goods overseas.
I therefore hope that the Chief Secretary, recognising the country's desperate export position, will have a change of heart this evening and say, knowing that it could do so much good in encouraging exports, that those who are partially or wholly connected with the acquiring of these orders should receive the selective employment tax rebate.

Mr. F. A. Burden: I want to appeal for the people who are engaged wholly in exports. I take the point in Amendment No. 92 that the person for whom a refund is made shall be
… a full-time worker employed solely in the gaining of exports …
One category of firms so engaged can be very clearly defined. They are those firms, mostly in London, which act as buying agents entirely and absolutely for companies overseas. In most instances, they are engaged solely in selling consumer goods or in sending consumer goods against orders to their principals

overseas. I can give very definite examples, and the companies can be easily recognised.
One of these firms buys in the London market for no fewer than 26 American stores. It has no other function. The merchandise is bought for and by the American firms in their name on the English market. The orders are placed on the London market with English firms. The firm goes so far as to give guidance on design, selling and packing, and on everything that might be required by their people in America. It discusses the promotion of those goods in America, and it places the orders. It goes even further than that. It arranges the shipment of the goods, handles all the shipping documents and pays in England within seven days on behalf of its American clients.
Those circumstances do not apply only to America. I give that case as an instance, because this is a very big firm dealing with very considerable quantities of British merchandise. It does not buy anything at all for sale on the British market. Its books would show quite clearly that every purchase it has made has been made for export.
There is a firm in Bermuda, well known for its set-up. It has its own London buying office. Not only is the office interested in placing orders given by its principals overseas but it is constantly seeking out new products for the principals' markets. The same thing applies to the South African and other markets. These people and firms are exclusively engaged on exports, and it can be quite clearly shown that every member of their staffs is so engaged. The Treasury would have no difficulty at all in establishing their function. These people are very bitter because they, too, have to pay the selective employment tax.
I ask the right hon. Gentleman to give particular consideration to this comparatively small number of firms. They are few in number, but they are of vital importance to us. In almost every case they are owned by their principals overseas. They are not even owned by anyone here. There are some free buying agencies which are owned by people in this country but, again, if they are engaged solely in dispatching British merchandise to overseas customers, they form a vital link


in the export chain. Very serious consideration should be given to the exclusion of these firms.
Companies with principals in this country, engaged entirely and exclusively in the export trade, feel they are hard done by. My hon. Friend the Member for Leicester, South-West (Mr. Tom Boardman) has referred to candyfloss. No one would suggest that a candyfloss manufacturer would sent his produects overseas or that he is doing much for the economy, but the companies I have spoken of, both those run by British principals and those run for foreign principals, and entirely owned by overseas companies to whom they export, feel very bitter about this tax which is adding considerably to their costs.

Mr. Keith Speed: This debate has followed the usual pattern of S.E.T. debates in that all hon. Members who have taken part in it are concerned about the tax. About a year ago I made my maiden speech and said that one of the troubles with British industry was that its output was production-orientated rather than marketing-orientated. For anyone to imagine that the sheer production of goods which will then qualify for S.E.T. refund in course of time is the end of the story, is to display a lamentable ignorance of what exporting is about.
Exporting is, first finding a market, then doing design work. Production comes into this pattern and one has to have the sales and after-sales service, credit arrangements and the rest. The whole thing is a marketing operation. Any company which thinks it can solve its difficulties merely by production will soon be out of business. We have not done so well as we might, because in so many respects companies are not marketing-orientated. The present S.E.T. exacerbates this already bad situation. Is it seriously argued that too many people are employed in marketing, too many in providing credit for exports or too many in providing necessary insurance and documentation? Surely that is not so.
My hon. Friend the Member for Leicester, South-West (Mr. Tom Boardman) spoke about firms with a good vertical structure whereby the whole operation can be carried out within the

firm. Many firms are doing well on that score. I have had personal experience of small firms which have been trying to export but they have not the staff to do the whole marketing concept.

5.45 p.m.

Mr. Burden: Does my hon. Friend agree that what he has been saying highlights the importance of the firms of which I spoke, which set up their market research in this country to help British firms to design for export?

Mr. Speed: I am grateful to my hon. Friend. Where companies have not within their orbit all the exporting expertise and have not grown to this stage, they have to employ outside people to help them. As we have heard from almost every hon. Member who has spoken in this debate, those outside people are penalised by selective employment tax in their export efforts. My hon. Friend the Member for Leicester, South-West and I realise that we could not ask for everything in this respect. That is why in suggesting Amendment No. 93 we have suggested this differential for people who are employed in exports only to a certain extent. They may be in service partly for exports and partly for the home market. No doubt the drafting of our Amendment is far from ideal, but I hope that the Chief Secretary will accept its principle.
The hon. Member for Luton (Mr. Howie) and my hon. Friend the Member for Folkestone and Hythe (Mr. Costain) have spoken of consulting engineers. When I took part with other hon. Members in a tour of North Africa recently we met a number of such people in Algeria and other countries who were working on pipelines. They are doing a first-class job particularly in follow-up services and for the exports which may follow. If anyone should suggest that a 5 per cent. differential would not make much difference, they should speak to these people on the spot. This is a very competitive market in which we have to compete against Americans, Germans, Italians and Japanese. Some of the contracts run into six or seven figures. The potential in North Africa is considerable.
The first essential must be balance of payments and increased exports. A former Prime Minister said, "Exporting is fun." It may be fun, but it is damned hard work. Those engaged in exporting


should be rewarded, not penalised. We want a fundamental reappraisal of the whole concept, which is a marketing rather than a production approach. That is why I hope our Amendment will be supported.

Mr. Bruce Campbell: I support Amendment No. 93. If it were accepted it would certainly bring very welcome relief to certain industries in my constituency which are finding that crippling effect of selective employment tax so serious that some—principally the small ones—are being driven out of business.
Oldham is an old cotton town. The cotton industry has been in decline for a number of years now, but a resilient and resourceful people have turned their talents to other industries and those industries contribute a great deal to exports. Yet many of them are crippled by the imposition of selective employment tax. In Oldham there is an industry called the textile waste reclamation industry. It brings great benefits to our country. It converts old textiles, worn-out clothing and other products, into new products. Some of these wastes can be turned into high quality paper which otherwise we should have to import. Other kinds of textile waste are turned into surgical dressings, felts and useful products of that kind, many of which are exported.
If the industry did not utilise these waste products in this way, those surgical dressings, for example, would have to be made out of raw cotton, all of which would have to be imported, because we do not grow cotton here. However, for some reason which I and those engaged in this industry cannot understand, selective employment tax is imposed upon this industry. If this is not a manufacturing industry, I do not know what is. However, the tax is imposed.
I have been very glad to learn that the Chancellor proposes to relieve from selective employment tax some of the other reclamation industries. I understand that the scrap metal reclamation industry and the waste paper reclamation industry are to be relieved of the burden of this iniquitous tax. All the arguments that apparently prevailed in regard to those industries applied with

equal force, if not more forcibly, to the textile waste reclamation industry. Yet apparently no similar relief it to be given to that industry.
I understand the Chancellor's difficulties. I understand that he probably has to draw a line somewhere. What I cannot understand is what logical reason there can be for drawing a line in such a way that the scrap metal reclamation industry falls on one side of it and the textile waste reclamation industry falls on the other. I assure the Chief Secretary that this is an industry which is important for exports. One firm in my constituency tells me that it has a turnover of £4 million a year and that between 25 per cent. and 30 per cent. of its products are exported. I am therefore talking about an industry which not only saves us a great amount of imports, but also contributes a great deal towards our exports. There are those of us who cannot understand why a Government who constantly talk about their balance of payments problem can cripple industries such as these, which contribute so much to the solution of that very problem. I ask the Chief Secretary to think again, particularly about this industry.

Mr. John Nott: I congratulate my hon. and learned Friend for Oldham, West (Mr. Bruce Campbell) on a short but very telling speech. I want too to congratulate my hon. Friend the Member for Meriden (Mr. Speed) on putting his finger on one of the most serious anomalies in the operation of this tax. I am sure that my hon. Friend is right that the major problem in Britain is that we are too product-orientated rather than market-orientated.
A perfect example of this was the Chief Secretary's speech on Second Reading, when he went into a long academic dissertation, stretching some tattered economic theory to absurdity, to explain to us the difference between above and below the line costs in industry, until someone on these benches said, "And what about price?" The Chief Secretary had to be reminded that price was an important element in the selling of a product overseas.
This demonstrates a general attitude of mind on the Government Front Bench, that the production and the manufacturing side are infinitely more important


than the marketing and servicing sides. This is an attitude which prevails throughout the country. Many British industries speak about their product with immense pride but seldom speak about their marketing. I agree with my hon. Friend that many firms rely on the services of export agents and that the successful exporting companies are those which go around the world knocking on the doors of agents and chasing their distributors day by day. It is the marketing side that we should be helping more.

Mr. Geoffrey Rhodes: I have been following the last two or three speeches very closely. I agree wholeheartedly that there is a fundamental incorrectness of philosophy in arguing that servicing is less important than production. I am sure that we are wrong to consider the marketing operation as the country's soft under-belly, as one member of the Government described it when he was on the back benches. In the presence of the right hon. Member who has suggested the value-added tax, I should like to ask how that tax, which I understand is the Opposition's policy, could stop this problem.

Mr. Nott: I was interested yesterday when the Chancellor devoted one-third of his speech to what he thought Tory policy would be. I can only assume that the Chancellor devoted so much time to the subject because he was rehearsing his first speech as Shadow Chancellor. There was no other reason why he should have devoted so much time to dealing with what he assumed our policy to be. In fact, a value-added tax such as in France and in Germany, where it is in a different form, can be rebated to people who are operating in the export services field.
I want to be brief, so I will move on now to the comments I intended to make. One of the principle reasons which the Government have always given for taxing services is that it is a quid pro quo for purchase tax on goods and for excise duty. I do not want to argue the logic of this. I do not agree with the logic because services are a vital element in total costs. Services are taxed, because they are taxed when the ultimate product comes to market, in the form of purchase tax. Services are just as much an element in costs as wages are.
Leaving that aside, it cannot be denied that the Government's whole principle and that of practically every other trading nation is that indirect taxes fall away at the frontier. The major anomaly of S.E.T., as shown by the Amendment, clearly is that indirect taxes do not fall away at the frontier on services. Therefore, a way must be found of overcoming this obstacle.
When the S.E.T. was introduced, the Government had a premium for manufacturing industries. I well remember that an argument was then advanced, which I have heard several times since, to the effect that our manufacturing sector is exporting a far greater percentage of its total production than the services are. In 1963—this is the latest year for which I have figures—28 per cent. of our total manufactured goods were exported, whereas the Committee on Invisible Earnings estimated that 19 per cent. of total services went directly or indirectly to exports.
The interesting thing is that over the last few years the proportion of exports represented by services has risen, whereas the percentage of exports represented by manufactured goods has remained static. Our invisible exports have been increasing as a ratio faster than our visible exports.
Recently, following on devaluation, this has become an infinitely more important subject, as the Chief Secretary well knows. Let us say that about £20 is the import content of £100 of exports. In the case of services about £9 of every £100 is the import content of an exported invisible item. Since devaluation the whole value of our invisibles has obviously been tremendously enhanced for Britain, and for this reason. I therefore suggest that the Chief Secretary needs to look at this whole matter again in this Finance Bill.
The problem is that S.E.T.—this is one of its major deficiencies—is not levied by type and destination of service or of product. It is levied on the nature of the employment of the person. The difficulty about Amendment No. 92, and the even greater difficulty about Amendment No. 93, is that in many cases the export earnings cannot be identified. It would be difficult to identify, for instance, the invisible export content in tourism. For


that reason, I think that I prefer my right hon. Friend's Amendment No. 92, because there is no doubt about it there.
My hon. Friend the Member for the City of Chester (Mr. Temple) referred to insurance. It would be simple to ascertain the premiums represented by overseas insurance business. Likewise, it would be simple to take the turnover of export houses directly related to overseas business. But, as I say, it would be difficult to identify the export and non-export content of the tourist trade.
I hope that the Chief Secretary will give us some joy by accepting my right hon. Friend's Amendment, which is the one which I prefer.

6.0 p.m.

Mr. Diamond: I want there to be no misunderstanding about this, so I say at the outset that I am as anxious as any right hon. or hon. Member to pay my tribute to those who are engaged in the export of goods or services. I recognise the value of it and the need for it. I agree with what has been said about the need to concentrate more on or, as it was put, to orientate our minds to, the need to export on the services side as well, and I accept what is said about the need to be more up to date in one's view about packaging and so on. I pay my tribute to those who are engaged in the export of goods or services, since the improvement in our balance of payments is a first consideration, as the Chancellor has made clear time and again.
But I go further than a tribute to those who are concerned in the export of goods or services. The balance of payments is a balance, the difference between certain things, and in the balance of trade it is the difference between exports and imports. Therefore, it would be churlish of me to restrict my tribute to those concerned in promoting exports, be they of goods or services. Although I recognise the importance and growing value of the export of services, I pay a sincere tribute also to those who are engaged in import substitution, equally valuable, often overlooked, but vital work. I refer to the encouragement of greater efficiency so that we are able by price, by service and in every other way to compete effectively with imports coming in from abroad. The only way open to this country to reduce imports in the long run is by

substituting a better, cheaper, more efficient, better made and better serviced British article.
We all agree in paying our tribute to the exporters of goods and of services, but—I am sorry that it is I alone who have to say this; I have not heard it expressed by a single hon. Member opposite—I pay my tribute also to those who are engaged in the substitution of imports.

Mr. Burden: On a point of order, Dr. Broughton. Would it not have been completely out of order if we had referred to that aspect?

Mr. Diamond: It was an observation lasting only one sentence, Dr. Broughton—

Mr. Burden: May I press that point of order, Dr. Broughton? May we have your Ruling?

The Temporary Chairman (Dr. A. D. D. Broughton): It would not have been out of order to refer to it.

Mr. Diamond: Hon. Members should not have a conscience about it already.

Mr. Burden: rose—

Mr. Diamond: I shall be glad to give way later. We are in Committee, and perhaps the most expeditious way to proceed is to give way during one's speech rather than wait for a subsequent speech. But I hope that the hon. Gentleman will allow me to make one or two points, after which I shall give way.
I wish to correct certain matters of fact so that we may proceed on agreed facts. The hon. Member for Worthing (Mr. Higgins) drew attention to what he thought were certain difficulties regarding videotape. In fact, the manufacture of videotape is a manufacturing industry under the Standard Industrial Classification, and separate establishments of T.V. companies engaged in it will have a refund of tax, whether exporting or not.

Mr. Higgins: Will the right hon. Gentleman clarify what he has said? What is the position of those who are engaged in performances which are then embodied in a videotape which is exported? The relevant question relates not to the actual tape but to the programme which is being exported. Second, what is the position as regards those who


may for a given period be engaged on export items but are then subsequently engaged on domestic matters?

Mr. Diamond: The hon. Gentleman drew attention to what he regarded as an anomaly between videotape and film. I wanted to make clear that he was mistaken as to the facts, and I thought that the first thing to do was to get our facts right.
In as much as the manufacture of film is a manufacturing activity and the exhibition of a film in a cinema is a service, so the manufacture of videotape is a manufacturing activity and there may then be services carried out subsequently which may partake of entertainment services or information services, so one distinguishes between the two.

Mr. Higgins: It is not a question of the making of film; it is the making of films or the making of videotape which embodies a performance. Is it the fact that a series of people engaged in making a film are not subject to tax now and a series of people engaged in taking part in a performance which is then placed on videotape are subject to tax?

Mr. Diamond: Yes, because there is that distinction to be drawn which the hon. Gentleman has himself just drawn. I repeat that where there is a manufacturing activity as there is in the manufacture of videotape, it does not ultimately bear the tax. Where there is a service, it bears the tax. In that sense, it is exactly comparable with the manufacture of film and the exhibition of it. The manufacture of film now includes the manufacture of film and the production of the film because that is held to be a similar process. The hon. Gentleman introduced this only incidentally, and I did not want him to base his case on a misconception of facts.
My hon. Friend the Member for Luton (Mr. Howie) drew attention to what he thought was an anomaly between a drawing office in London away from the manufacturing organisation and a drawing office situated within the factory. He has misunderstood the position. Drawing office staff who carry out design work for manufacturing are treated as engaged in a manufacturing activity, and that is so whether it be sited at the factory or entirely separate. If my hon. Friend had in mind a drawing office concerned with work on construction, then, since con-

struciton is treated as a service, the drawing office follows that way, too.
The hon. Member for Folkestone and Hythe (Mr. Costain) referred to consultants. It was not a major part of his speech but he referred incidentally to the position of consultants or consulting engineers working entirely abroad. No doubt he had in mind work on civil engineering contracts abroad. If they are working full-time abroad, after a qualifying period they are not called upon to pay S.E.T.

Mr. Costain: Obviously, I must have put the point badly. I was referring to those designing work in this country for contracting wholly abroad.

Mr. Diamond: I did say that this was not a major part of the hon. Gentleman's speech. But he went on to refer to consultants working abroad full-time on the same process.

Mr. Temple: They pay the tax.

Mr. Diamond: The hon. Member for City of Chester (Mr. Temple) is wrong. They do not pay the tax. After a qualifying period, they are relieved of the tax if they are working full-time abroad.
I come now to the main arguments advanced. There are a number of difficulties which I want to put to the House in connection with this group of Amendments. The first is the fatal difficulty—and I am sorry that the hon. Member for Worthing did not deal with this with sufficient care—concerning our international position. There is no question but that, so far as the export of goods is concerned, we cannot take exceptional measures. Government after Government have turned their thoughts to this proposition and have rejected it for the best of reasons—that the maintenance of these international rules is in the best interests of a trading nation such as ours. So far as the export of goods in concerned, both to E.F.T.A. countries and under the G.A.T.T., we could not adopt methods of the kind proposed, since they would be a form of subsidy.
I come now to the question of the export of services. It is equally the case that, for exporting services in connection with goods, the E.F.T.A. rules are quite clear. The Amendment would be a breach of the rules. For us to try and expand this in other countries or to try and get


around it in some way with E.F.T.A. would be counter-productive. We already have considerable difficulties in maintaining the channels of trade open. We are the subject of continual complaints from other countries alleging that we are going a little too far or considerably too far in a variety of ways. We have to bear in mind that trade consists in having good relations between buyer and seller. Thus, in relation to the G.A.T.T. and E.F.T.A. positions, we could not in the one legally and in the other wisely adopt any of these proposals.

Mr. Burden: As a result of the imposition of this tax our exports are being penalised above their true cost. This does not happen in the case of other members of E.F.T.A. and the G.A.T.T., whose products are not so impeded. Surely there is a good argument for pointing out to them that this is not equity and they would not suffer from our proposal because, in the international markets, our goods are the only ones penalised? Will the Government discuss it with them?

Mr. Diamond: The hon. Gentleman might have waited until I got to that point, but perhaps it is convenient for me to deal with it now. The hon. Gentleman is wrong. So far as the addition to the cost of the goods is concerned, the hon. Gentleman would not maintain that S.E.T. is included in the cost of the goods because the manufacturer does not have to pay it. The hon. Gentleman is therefore saying that—

Mr. Burden: rose—

Mr. Diamond: I hope that the hon. Gentleman will be patient. Communication is a process of listening both ways. What he is saying—and he is wrong—is that as compared with countries in the E.E.C our on-cost of labour as a result of our bearing this tax is greater than theirs. The fact is that, prior to the present increase in the tax, we were the lowest. Our on-cost on labour was lower than any of the E.E.C. countries. Our exporters therefore were advantaged and not disadvantaged in relation to the cost of labour for supplying services in relation to the export of goods. With the new rates we shall still be comparable or less, but not more, in every case. I may add that I am taking the E.E.C. figures as my guide.

6.15 p.m.

Mr. Speed: rose—

Mr. Diamond: It is not possible for me to make progress with my speech.

Mr. Speed: This is on a point of clarification. What about insurance contributions? Will these not push these costs even higher when they are put on to on-cost?

Mr. Diamond: That is another reason for not giving way to interventions. I am sure that the House will wish me to stop giving way so much. It is impossible to reply to such an important debate if, when one is trying to deal with points in succession, one is asked to deal with what was to be a later part of one's speech. I hope that hon. Members will be patient and let me get on.
As I have said, we are in this considerable difficulty with E.F.T.A. and in the not quite so considerable difficulty with G.A.T.T. I do not want to exaggerate the position. The reason why there is not the same precision in the G.A.T.T. arrangements is that it has not been thought necessary to have the same regard to this matter since, of course, the cost involved is so insignificant. So far as the total of the exports handled by the export houses and the total of S.E.T. paid by them are concerned—I am talking about goods where S.E.T. is higher than in relation to services and where the price is less elastic—S.E.T. represents a cost of approximately one-tenth of 1 per cent.
I have already said that the overhead cost of labour in relation to services for export goods has been less in this country than in any of the E.E.C. countries and is still competitive. In these circumstances, it is a gross exaggeration to say that this is a bar to exporting—quite apart from the fatal difficulty to which I have referred—and, of course, so far as services are concerned, I underline what the hon. Member for St. Ives (Mr. Nott) said. I am grateful and am most willing to acknowledge the good work of all those in the City and elsewhere who have contributed to exporting. I shall not use a post hoc procter hoc argument—the hon. Gentleman referred to the figures—but they have been forging ahead, including during the whole of the time that S.E.T. has applied. All I am saying is that there is no evidence that S.E.T. provides any


difficulty whatever or is a bar to increases in our exports of goods or services.
I come now to the scope of the Amendments. They are intended to be restrictive in some cases but I do not think that anyone would suggest that the frontiers drawn by some of them could be sustained. Indeed, many hon. Members have argued against them. Some have urged the case for those engaged full time in exporting, others for those engaged part-time in exporting. Some have talked about consulting engineers only. Others, quite properly, have asked why we should distinguish between consulting engineers and architects, between architects and surveyors and many others, all of whom are providing excellent and essential services. It would be impossible to draw an agreed line and hold it. There would obviously be enormous pressures to extend it immediately. To accept these Amendments would be fatal to our international position, unhelpful to our exports, irrelevant to our export of services and would cause enormous difficulties in drawing the line between A and B and C.
There is finally the suggestion that it is a simple matter for an accountant to provide a certificate of the relevant cost involved. I ought not to go into this at too great length, because I do not think that anybody really believes that there is a basis for doing this. However, I will say that of course any accountant can provide any information which he is asked to provide and he can certify it, as he always does, because he takes care to certify no more than he knows to be the truth and if he does not know the truth, he merely certifies that someone else has said that it is the truth. No sensible accountant will stick his neck out and every accountant's certificate is given on the basis that not only is he insured against negligence as a further protection, but there is not likely to be any responsibility which he has not wholly fulfilled.
I say in particular to the hon. Member for the City of Chester that I am satisfied that the cost to the client, or the taxpayer, or the State—never mind who bears it—of providing records for a separate ascertainment of the salaries and wages involved in order to comply with these Amendments would be greater than the relief from the tax which might, if it were possible on these grounds, ensue.
I hope that I have satisfied the Com-

mittee that I am fully appreciative of the work done by exporters and substituters of imports, that I regret that we are unable because of our international position, to accept any of these Amendments, and that even if it were not for the international position, it would be unwise, unnecessary and irrelevant to do so.

Mr. Kenneth Baker: Would not the right hon. Gentleman agree that his main argument is that the fatal difficulty, to use his words, is that if we rebated S.E.T. on exports, G.A.T.T. and E.F.T.A. would object? Is it not the logical conclusion of that argument that when we abolish S.E.T., they will object even more, since they could then argue that we were giving all our economy and all our exports a tremendous boost?

Mr. Diamond: The logic of that argument is that when the hon. Gentleman has his own way—and he is a young man and I hope that he lives long enough to have his own way, because he is a very able man and he will add knowledge and grace to these benches in the course of the next 50 years—

Mr. Bence: Never.

Mr. Diamond: One must be democratic and encouraging and it is right to encourage the hon. Member to look forward to the next 50 years. In 50 years' time, he will be able to put into effect what he and his hon. Friends are claiming to be the right thing to do about S.E.T., namely, to turn it into an employment tax. If it is a payroll tax, or an employment tax, it will again not fall away at the frontier, precisely as the hon. Gentleman objects that the present tax does not fall away at the frontier.

Mr. Patrick Jenkin: If the Chief Secretary honestly believes that he has satisfied the Committee with that deplorable answer, he is indeed an optimist. Two things came out of his reply to the debate. First, all the objections he advanced to the Amendments would be irrelevant to a value-added tax. The answer is that if the Amendments cannot be accepted for selective employment tax, it is not the Amendments which are wrong; it is the tax which is wrong. All the cases that have been made—consulting engineers, architects, structural engineers, export salesmen, the insurance


industry, the production of video-tapes—for not taxing export content have been overwhelming.
Secondly, the tax on these export activities is not deliberate. On the contrary, it is merely an unintended but unavoidable by-product of the system adopted in the standard industrial classification, and if this is a by-product of the tax system, that is another argument why the tax must go.
I want to refer to videotapes. It is rare—and I say this as a tribute to the Chief Secretary—that he deliberately attempts to evade the argument, but I am bound to say that his reply on videotapes did just that. He sought to argue about the manufacture of the tape, whereas the argument is about selling the tape with the programme on it. The distinction which he sought to draw between the manufacture of films and the manufacture of videotapes was wholly unreal.
The present position is that film studios and laboratories can now claim rebates of S.E.T. for those of their employees who are directly concerned with the production of films, but it is wholly anomalous—

Mr. Bence: They get exemption for processing.

Mr. Jenkin: For making a film, the finished product of the film with the movie on it. That is treated as production.

Mr. Diamond: May I interrupt merely to state the fact? If I seemed to be evading the argument, I am sorry and obviously I did not take on board fully what the hon. Gentleman was saying. If he is now saying that the videotape with the recorded programme on it attracts S.E.T., he is inaccurate. It does not. If he looks at the new Standard Industrial Classification he will see that it is classified as a manufacturing activity.

Mr. Jenkin: That is extremely difficult for those of us who are dealing with this matter, because the Standard Industrial Classification is not available in the Vote Office. I do not know how many hon. Members have been able to get one, but I have not been able to get a copy of the 1968 edition and I am having to

work from the 1958 edition. However, it is certainly the impression of the television studios and they will be most interested to hear this.

Mr. Diamond: My hon. and learned Friend the Minister of State saw them only the day before yesterday and made all this quite clear.

Mr. Roy Roebuck: Withdraw.

Mr. Jenkin: On the contrary. The impression of those who operate television studios where they make the videotapes is that they are far from satisfied that they are getting equal treatment. However, no doubt we shall be able to return to this matter on Report in view of what the Chief Secretary has just said.
He said that there was no evidence that S.E.T. was acting as a hindrance to the earning of exports. This is a ludicrous proposition. I refer him to the evidence which I know he has had from the British Export Houses Association setting out chapter and verse of the cost disadvantage which export houses face because their people wholly engaged in merchanting goods for exports have to pay S.E.T. I would quote—but I am anxious to be brief—the figures which have been put to the Chancellor of the Exchequer, and it is absolute nonsense for the Chief Secretary to say that there is no evidence. Industry after industry in the City has complained to the Chancellor of the cost disadvantage, of the effect on their liquidity, of the difficulties that it makes for them in finance.
The balance of payments argument has always been stressed by the Government as a need to introduce this tax. One remembers the present Home Secretary's famous dictum, "You cannot export a haircut". He was quite right, but it has been asserted time and again that S.E.T. operates directly against the correction of our balance of payments deficit. The case was argued cogently in last August's issue of the Westminster Bank Review by an Oxford economist, Margaret Hall. The fact is that 44 per cent. of manufacturing output is exported, and 31 per cent. of services output is exported, yet the import content of the services output is vastly lower than the import content of the manufacturing output. This makes a complete nonsense


of the use of S.E.T. to discriminate against the service industries.
Some service industries have a nil import content and a substantial export earning content, yet they are penalised by S.E.T. because the Government cannot bring themselves to admit that office work can be productive. This ancient prejudice goes right to the heart of the S.E.T. It is a fiscal brontosaurus, and the country will not be happy until it is as extinct as every other brontosaurus.

In the meantime, the Amendments would go some way to relieving export industries of the penalties of the tax. I hope that my hon. and right hon. Friends will feel it right to divide in their favour in the Lobby.

Question put, That the Amendment be made:—

The Committee divided: Ayes 223, Noes 279.

Division No. 226.]
AYES
[6.32 p.m.


Alison, Michael (Barkston Ash)
Ewing, Mrs. Winifred
Maclean, Sir Fitzroy


Allason, James (Hemel Hempstead)
Eyre, Reginald
Macleod, Rt. Hn. Iain


Amery, Rt. Hn. Julian
Farr, John
McMaster, Stanley


Atkins, Humphrey (M't'n &amp; M'd'n)
Fortescue, Tim
Macmillan, Maurice (Farnham)


Awdry, Daniel
Foster, Sir John
McNair-Wilson, Michael (W'stow, E.)


Baker, Kenneth (Acton)
Galbraith, Hn. T. G.
McNair-Wilson, Patrick (New Forest)


Baker, W. H. K. (Banff)
Gilmour, Ian (Norfolk, C.)
Maddan, Martin


Balniel, Lord
Glover, Sir Douglas
Maginnis, John E.


Barber, Rt. Hn. Anthony
Godber, Rt. Hn. J. B.
Marples, Rt. Hn. Ernest


Batsford, Brian
Goodhart, Philip
Marten, Neil


Beamish, Col. Sir Tufton
Goodhew, Victor
Maude, Angus


Bell, Ronald
Gower, Raymond
Mawby, Ray


Bennett, Dr. Reginald (Gos. &amp; Fhm)
Grant-Ferris, R.
Maxwell-Hyslop, R. J.


Berry, Hn. Anthony
Gresham Cooke, R.
Maydon, Lt.-Cmdr. S. L. C.


Bessell, Peter
Grieve, Percy
Mills, Peter (Torrington)


Biffen, John
Grimond, Rt. Hn. J.
Mills, Stratton (Belfast, N.)


Biggs-Davison, John
Gurden, Harold
Miscampbell, Norman


Birch, Rt. Hn. Nigel
Hall, John (Wycombe)
Mitchell, David (Basingstoke)


Black, Sir Cyril
Hall-Davis, A. G. F.
More, Jasper


Blaker, Peter
Hamilton, Lord (Fermanagh)
Morgan-Giles, Rear-Adm.


Boardman, Tom (Leicester, S. W.)
Hamilton, Michael (Salisbury)
Morrison, Charles (Devizes)


Body, Richard
Harris, Frederic (Croydon, N. W.)
Munro-Lucas-Tooth, Sir Hugh


Boyle, Rt. Hn. Sir Edward
Harris, Reader (Heston)
Murton, Oscar


Braine, Bernard
Harrison, Brian (Maldon)
Nabarro, Sir Gerald


Brewis, John
Harrison, Col. Sir Harwood (Eye)
Neave, Airey


Brinton, Sir Tatton
Harvey, Sir Arthur Vere
Noble, Rt. Hn. Michael


Bromley-Davenport, Lt.-Col. Sir Walter
Harvie Anderson, Miss
Nott, John


Brown, Sir Edward (Bath)
Hastings, Stephen
Onslow, Cranley


Bruce-Gardyne, J.
Hawkins, Paul
Orr, Capt. L. P. S.


Buchanan-Smith, Alick (Angus, N &amp; M)
Hay, John
Orr-Ewing, Sir Ian


Buck, Antony (Colchester)
Heald, Rt. Hn. Sir Lionel
Osborn, John (Hallam)


Bullus, Sir Eric
Heseltine, Michael
Osborne, Sir Cyril (Louth)


Burden, F. A.
Higgins, Terence L
Page, Graham (Crosby)


Campbell, B. (Oldham, W.)
Hiley, Joseph
Pardoe, John


Campbell, Gordon (Moray &amp; Nairn)
Hill, J. E. B.
Peel, John


Channon, H. P. G.
Holland, Philip
Percival, Ian


Chichester-Clark, H.
Hooson, Emlyn
Peyton, John


Clark, Henry
Hordern, Peter
Pike, Miss Mervyn


Clegg, Walter
Hunt, John
Pink, R. Bonner


Cooke, Robert
Hutchison, Michael Clark
Pounder, Rafton


Cordle, John
Iremonger, T. L.
Price, David (Eastleigh)


Corfield, F. V.
Jenkin, Patrick (Woodford)
Prior, J. M. L.




Pym, Francis


Costain, A. P.
Johnson Smith, G. (E. Grinstead)
Quennell, Miss J. M.


Craddock, Sir Beresford (Spelthorne)
Jones, Arthur (Northant, S.)
Ramsden, Rt. Hn. James


Crouch, David
Jopling, Michael
Rawlinson, Rt. Hn. Sir Peter


Crowder, F. P.
Joseph, Rt. Hn. Sir Keith
Rees-Davies, W. R.


Cunningham, Sir Knox
Kaberry, Sir Donald
Renton, Rt. Hn. Sir David


Currie, G. B. H.
Kerby, Capt. Henry
Rhys Williams, Sir Brandon


Dalkeith, Earl of
Kershaw, Anthony
Ridley, Hn. Nicholas


Dance, James
King, Evelyn (Dorset, S.)
Ridsdale, Julian


d'Avigdor-Goldsmid, Sir Henry
Kirk, Peter
Rodgers, Sir John (Sevenoaks)


Dean, Paul
Knight, Mrs. Jill
Rossi, Hugh (Hornsey)


Deedes, Rt. Hn. W. F. (Ashford)
Lambton, Viscount
Royle, Anthony


Digby, Simon Wingfield
Lancaster, Col. C. G.
Russell, Sir Ronald


Dodds-Parker, Douglas
Lane, David
Sandys, Rt. Hn. D.


Doughty, Charles
Lewis, Kenneth (Rutland)
Scott, Nicholas


Drayson, G. B.
Lloyd, Rt. Hn. Geoffrey (Sut'n C'dfield)
Scott-Hopkins, James


du Cann, Rt. Hn. Edward
Lloyd, Ian (P'tsm'th, Langstone)
Sharples, Richard


Eden, Sir John
Lloyd, Rt. Hn. Selwyn (Wirral)
Shaw, Michael (Sc'b'gh &amp; Whitby)


Elliot, Capt. Walter (Carshalton)
Longden, Gilbert
Silvester, Frederick


Elliott, R. W. (N'c'tle-upon-Tyne, N.)
Lubbock, Eric
Sinclair, Sir George


Emery, Peter
McAdden, Sir Stephen
Smith, Dudley (W'wick &amp; L'mington)


Errington, Sir Eric
MacArthur, Ian
Smith, John (London &amp; W'minster)




Speed, Keith
Vaughan-Morgan, Rt. Hn. Sir John
Williams, Donald (Dudley)


Stainton, Keith
Vickers, Dame Joan
Wilson, Geoffrey (Truro)


Stodart, Anthony
Waddington, David
Winstanley, Dr. M. P.


Stoddart-Scott, Col. Sir M.
Walker, Peter (Worcester)
Wood, Rt. Hn. Richard


Summers, Sir Spencer
Walker-Smith, Rt. Hn. Sir Derek
Woodnutt, Mark


Tapsell, Peter
Wall, Patrick
Worsley, Marcus


Taylor, Sir Charles (Eastbourne)
Walters, Dennis
Wright, Esmond


Taylor, Edward M. (G'gow, Cathcart)
Ward, Dame Irene
Younger, Hn. George


Taylor, Frank (Moss Side)
Weatherill, Bernard



Temple, John M.
Wells, John (Maidstone)
TELLERS FOR THE AYES:


Thatcher, Mrs. Margaret
Whitelaw, Rt. Hn. William
Mr. Timothy Kitson and


Thorpe, Rt. Hn. Jeremy
Wiggin, A. W.
Mr. Hector Munro.


Turton, Rt. Hn. R. H.






NOES


Albu, Austen
Edwards, Robert (Bilston)
Johnson, Carol (Lewisham, S.)


Allaun, Frank (Salford, E.)
Edwards, William (Merioneth)
Johnson, James (K'ston-on-Hull, W.)


Alldritt, Walter
Ellis, John
Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)


Anderson, Donald
English, Michael
Jones, J. Idwal (Wrexham)


Archer, Peter
Ensor, David
Jones, T. Alec (Rhondda, West)


Ashley, Jack
Evans, Albert (Islington, S. W.)
Kelley, Richard


Ashton, Joe (Bassetlaw)
Evans, Fred (Caerphilly)
Lawson, George


Atkins, Ronald (Preston, N.)
Faulds, Andrew
Leadbitter, Ted


Atkinson, Norman (Tottenham)
Fernyhough, E.
Lee, Rt. Hn. Frederick (Newton)


Bacon, Rt. Hn. Alice
Finch, Harold
Lee, John (Reading)


Bagier, Gordon A. T.
Fitch, Alan (Wigan)
Lestor, Miss Joan


Barnes, Michael
Fitt, Gerard (Belfast, W.)
Lever, Harold (Cheetham)


Barnett, Joel
Fletcher, Raymond (Ilkeston)
Lever, L. M. (Ardwick)


Beaney, Alan
Fletcher, Ted (Darlington)
Lewis, Arthur (W. Ham, N.)


Bence, Cyril
Foley, Maurice
Lewis, Ron (Carlisle)


Benn, Rt. Hn. Anthony Wedgwood
Foot, Rt. Hn. Sir Dingle (Ipswich)
Lipton, Marcus


Bidwell, Sydney
Foot, Michael (Ebbw Vale)
Lomas, Kenneth


Binns, John
Ford, Ben
Loughlin, Charles


Bishop, E. S.
Forrester, John
Luard, Evan


Blackburn, F.
Fowler, Gerry
Lyon, Alexander W. (York)


Blenkinsop, Arthur
Fraser, John (Norwood)
Lyons, Edward (Bradford, E.)


Booth, Albert
Freeson, Reginald
Mabon, Dr. J. Dickson


Boston, Terence
Galpern, Sir Myer
McCann, John


Bottomley, Rt. Hn. Arthur
Gardner, Tony
MacColl, James


Boyden, James
Garrett, W. E.
Macdonald, A. H.


Bradley, Tom
Gordon Walker, Rt. Hn. P. C.
McGuire, Michael


Bray, Dr. Jeremy
Gray, Dr. Hugh (Yarmouth)
McKay, Mrs. Margaret


Brooks, Edwin
Greenwood, Rt. Hn. Anthony
Mackenzie, Gregor (Rutherglen)


Brown, Rt. Hn. George (Belper)
Gregory, Arnold
Mackie, John


Brown, Hugh D. (G'gow, Provan)
Grey, Charles (Durham)
Mackintosh, John P.


Brown, Bob (N'c'tle-upon, Tyne, W.)
Griffiths, David (Rother Valley)
Maclennan, Robert


Brown, R. W. (Shoreditch &amp; F'bury)
Griffiths, Eddie (Brightside)
McMillan, Tom (Glasgow, C.)


Buchan, Norman
Griffiths, Rt. Hn. James (Llanelly)
McNamara, J. Kevin


Buchanan, Richard (G'gow, Sp'burn)
Griffiths, Will (Exchange)
MacPherson, Malcolm


Butler, Herbert (Hackney, C.)
Gunter, Rt. Hn. R. J
Mallalieu, E. L. (Brigg)


Butler, Mrs. Joyce (Wood Green)
Hamilton, James (Bothwell)
Mallalieu, J. P. W. (Huddersfield, E.)


Callaghan, Rt. Hn. James
Hamilton, William (Fife, W.)
Manuel, Archie


Cant, R. B.
Hamling, William
Mapp, Charles


Carmichael, Neil
Hannan, William
Marks, Kenneth


Castle, Rt. Hn. Barbara
Harper, Joseph
Marquand, David


Chapman, Donald
Harrison, Walter (Wakefield)
Marsh, Rt. Hn. Richard


Coe, Denis
Hazell, Bert
Mason, Rt. Hn. Roy


Coleman, Donald
Healey, Rt. Hn. Denis
Mellish, Rt Hn. Robert


Corbet, Mrs. Freda
Heffer, Eric S.
Mendelson, John


Crawshaw, Richard
Henig, Stanley
Mikardo, Ian


Crosland, Rt. Hn. Anthony
Herbison, Rt. Hn. Margaret
Millan, Bruce


Crossman, Rt. Hn. Richard
Hilton, W. S.
Miller, Dr. M. S.


Darling, Rt. Hn. George
Hobden, Dennis
Milne, Edward (Blyth)


Davidson, Arthur (Accrington)
Hooley, Frank
Molloy, William


Davies, G. Elfed (Rhondda, E.)
Houghton, Rt. Hn. Douglas
Moonman, Eric


Davies, Dr. Ernest (Stretford)
Howell, Denis (Small Heath)
Morgan, Elystan (Cardiganshire)


Davies, Rt. Hn. Harold (Leek)
Howie, W.
Morris, Charles R. (Openshaw)


Davies, Ifor (Gower)
Hoy, James
Morris, John (Aberavon)


de Freitas, Rt. Hn. Sir Geoffrey
Huckfield, Leslie
Moyle, Roland


Delargy, Hugh
Hughes, Rt. Hn. Cledwyn (Anglesey)
Mulley, Rt. W. Frederick


Dell, Edmund
Hughes, Hector (Aberdeen, N.)
Murray, Albert


Dempsey, James
Hughes, Roy (Newport)
Neal, Harold


Diamond, Rt. Hn. John
Hunter, Adam
Newens, Stan


Dickens, James
Hynd, John
Oakes, Gordon


Dobson, Ray
Irvine, Sir Arthur (Edge Hill)
Ogden, Eric


Doig, Peter
Jackson, Peter M. (High Peak)
Oram, Albert E.


Dunn, James A.
Janner, Sir Barnett
Orbach, Maurice


Dunnett, Jack
Jay, Rt. Hn. Douglas
Orme, Stanley


Dunwoody, Mrs. Gwyneth (Exeter)
Jeger, George (Goole)
Oswald, Thomas


Dunwoody, Dr. John (F'th &amp; C'b'e)
Jeger, Mrs. Lena (H'b'n &amp; St. P'cras, S.)
Owen, Dr. David (Plymouth, S'tn.)


Eadie, Alex
Jenkins, Hugh (Putney)
Owen, Will (Morpeth)


Edelman, Maurice
Jenkins, Rt, Hn. Roy (Stechford)
Palley, Walter







Page, Derek (King's Lynn)
Rogers, George (Kensington, N.)
Walker, Harold (Doncaster)


Paget, R. T.
Shaw, Arnold (Ilford, S.)
Wallace, George


Pannell, Rt. Hn. Charles
Shinwell, Rt. Hn, E.
Watkins, David (Consett)


Park, Trevor
Shore, Rt. Hn. Peter (Stepney)
Watkins, Tudor (Brecon &amp; Radnor)


Parker, John (Dagenham)
Short, Mrs. Renée (W'hampton, N. E.)
Wellbeloved, James


Parkin, Ben (Paddington, N.)
Silkin, Rt. Hn. John (Deptford)
Wells, William (Walsall, N.)


Parkyn, Brian (Bedford)
Silkin, Hn. S. C. (Dulwich)
Whitaker, Ben


Pavitt, Laurence
Silverman, Julius
White, Mrs. Eirene


Pearson, Arthur (Pontypridd)
Skeffington, Arthur
Whitlock, William


Peart, Rt. Hn. Fred
Slater, Joseph
Wilkins, W. A.


Pentland, Norman
Small, William
Willey, Rt. Hn. Frederick


Perry, Ernest G. (Battersea, S.)
Snow, Julian
Williams, Alan (Swansea, W.)


Perry, George H. (Nottingham, S.)
Spriggs, Leslie
Williams, Alan Lee (Hornchurch)


Prentice, Rt. Hn. R. E.
Steele, Thomas (Dunbartonshire, W.)
Williams, Clifford (Abertillery)


Price, Christopher (Perry Barr)
Stonehouse, Rt. Hn. John
Williams, Mrs. Shirley (Hitchin)


Price, Thomas (Westhoughton)
Strauss, Rt. Hn. G. R.
Williams, W. T. (Warrington)


Price, William (Rugby)
Summerskill, Hn. Dr. Shirley
Willis, Rt. Hn. George


Probert, Arthur
Swain, Thomas
Wilson, Rt. Hn. Harold (Huyton)


Rankin, John
Taverne, Dick
Wilson, William (Coventry, S.)


Rees, Merlyn
Thomas, Rt. Hn. George
Winnick, David


Rhodes, Geoffrey
Thomson, Rt. Hn. George
Woodburn, Rt. Hn. A.


Roberts, Albert (Normanton)
Tinn, James
Woof, Robert


Roberts, Rt. Hn. Goronwy
Tomney, Frank
Wyatt, Woodrow


Roberts, Gwilym (Bedfordshire, S.)
Tuck, Raphael



Robertson, John (Paisley)
Urwin, T. W.
TELLERS FOR THE NOES:


Robinson, Rt. Hn. Kenneth (St. P'c'as)
Varley, Eric G.
Mr. Ioan L. Evans and


Rodgers, William (Stockton)
Wainwright, Edwin (Dearne Valley)
Mr. Neil McBride


Roebuck, Roy

6.45 p.m.

Mr. Eric S. Heffer: I beg to move Amendment No. 98, in page 64, line 9, at end insert:
(12) Where an employer has paid selective employment tax for any contribution week beginning on or after 7th July 1969 in respect of a person employed as a recognised apprentice in the building and construction industries the Secretary of State for Social Security shall make that employer in respect of that person and that week a payment of an amount equal to the tax paid.

The Temporary Chairman (Dr. A. D. D. Broughton): It will be convenient to discuss at the same time Amendment No. 86, page 64, line 9, at end insert:
(12) Where an employer has paid selective employment tax for any contribution week beginning on or after 7th July 1969 in respect of a clerk articled to him, the Secretary of State for Social Security shall make to that employer in respect of that articled clerk and that week a payment of an amount equal to the tax paid.

Mr. Heffer: I indicated clearly yesterday that I was opposed to the application of selective employment tax to the building and construction industry. Whatever arguments can be marshalled in support of applying S.E.T. to the building industry, they cannot be marshalled in support of applying it to apprentices in that industry. Therefore, what I said about the industry as a whole doubly applies to apprentices.
After 7th July, selective employment tax is to be applied to apprentices over 18 years of age at the rate of 40s. a week and under 18 years of age at the rate of

24s. a week. Only yesterday an employer's representative argued that S.E.T. should be removed as it applies to apprentices, but suggested that it should apply to all the workers employed by public industries. I do not go along with that. Nothing which is gained by way of S.E.T. in the publicly-owned industries should make up for the amount lost by not applying it to apprentices. I do not wish to give the impression that I support views of the kind expressed by one of the employer's representatives.
To apply S.E.T. to apprentices is wrong in principle, because the training of apprentices is important to the future not only of our country, but of the construction and building industries and other industries. Many apprentices begin their training in the building industry and then go into other industries. Some of those other industries are not in a position to give training to apprentices—for example, in maintenance—which can be given in the building industry. It is therefore important that we should recognise the importance of apprentices to the future of our country and industry.
Yesterday, the hon. Member for North Angus and Mearns (Mr. Buchanan-Smith) said that the Chancellor of the Exchequer did not reply to the points which I had made because he believed that my right hon. Friend did not have an answer to them. The position as I understand it is that the Chancellor believed that we would have a full-dress debate on the whole question of the building industry and that the points would be replied to


then. Unfortunately, many of the Amendments—some put down by hon. Members opposite and some by myself—which would have given us the opportunity of a debate on the whole question of the application of the tax to the building industry, and especially the point of labour-only contracting, have not been selected. I do not criticise the Chair for that. Therefore, we can have a full dress debate only on the Question, "That the Clause stand part of the Bill."

Mr. R. Chichester-Clark: Does not the hon. Member agree that it is disgraceful that the Government have so tightly drawn the Money Resolution that a debate on the building industry in this context is virtually impossible? This is an industry employing something like one-seventh of our total work force. Is it not disgraceful that we cannot debate it?

Mr. Heffer: I would not use the term "disgraceful". I would say that it was unfortunate, which is not quite the same thing, although the point is well taken. I hope, however, that we will have a debate on the Question, "That the Clause stand part of the Bill", so that the points which would have been raised concerning labour-only can be raised then.
It is true that some extremely good training is given in some of the very big firms in the building industry, but in the main it is the medium and smaller firms in the industry which carry out the training. The larger firm is the exception which proves this rule.
This is important when we consider the selective employment tax, because the larger firm is able to absorb S.E.T. much more easily than the smaller firm. There are many ways in which this can be done. First, the larger firm can use methods of productivity and new methods with machinery which cannot be applied in the smaller firms. Secondly, the larger firm can probably employ a first-class accountant who is able to find ways and means of absorbing some of the S.E.T. Again, this does not apply to the medium and smaller firms. It is not possible for them to absorb it in the same way as a larger firm is able to do.
The Amendment is an important one for a number of reasons, which I will outline. First, payment of S.E.T. on

apprentices must discourage the smaller firms from employing them. This, in turn, affects considerably the future development of the building and construction industries. It means that potential skill is lost to the country, and lost for ever. It is all very well to say that we should have adult training schemes—I accept that we should have more adult training schemes—hut an adult who trains for six months in a Government training centre or in the Forces can do only a certain type of work. For example, he could not do the work that would be required in the construction of this Chamber. One would need a skilled apprentice to do that type of work. I spent seven years as an apprentice and I know what it means to be properly trained as a joiner in my craft. It is clear, therefore, that skill would be lost to us if we had a situation in which the smaller firms could not take on apprentices.
Secondly, the period of apprenticeship gives precisely the training that is required. If apprenticeship is a period of training, the output of the young person who is being trained obviously cannot be as great as that of the fully-skilled craftsman. Even during the last two years, when the output has been much higher and has almost reached the level of that of a fully-skilled craftsman, it has never quite reached the level of a highly-skilled craftsman who has completed his training and who may have been working at his craft for many years.
The third point to be taken into consideration is that S.E.T. has meant the growth of labour-only. Let me explain what I mean, because I was asked yesterday what I meant by "labour-only" and why I was so concerned about it. If I were in the Treasury I would see that labour-only was stopped right now, because I think that a considerable amount of money is lost as a result of labour-only. One of my hon. Friends yesterday was given a figure of something like £75 million as being lost.
It is not only that. Labour-only means that a certain number of workers do certain jobs. They take work on what is known as the lump. Not only do many of them not pay S.E.T., but there are all sorts of tax evasions. There is insurance evasion. There is a whole series of evasions. Let us remember also that labour-only gangs do


not have apprentices, who would slow down the work. They do not have time to be interested in helping to teach a young man how to do a job. This, therefore, is a third and very important reason why we should consider abolishing S.E.T. for apprentices.

Mr. Peter Archer: Would my hon. Friend agree that a further argument against labour-only subcontractors is that all too often no one is responsible for safety?

Mr. Heffer: Of course, I agree entirely.
I should like to refer to some evidence from the Phelps Brown Report precisely on the question of the labour-only gang. I quote from paragraph 376, at page 136:
Witnesses who have assessed its other effects very variously have agreed that it is inimical to the traditional form of training for the crafts through apprenticeship: men whose aim is to complete a given task as quickly as possible do not want to carry a learner in their team, or to interrupt their own work in order to instruct him.
Incidentally, I commend the Phelps Brown Report to all hon. Members who have not read it. It is a very important Report and it is time that some of its recommendations were carried out by the Government.
The total number of operatives in the construction industry is 1,436,000. That figure was given by the Department of Employment and Productivity on 7th May, 1969, so that it is about as up-to-date a figure as one could get. The figure for apprentices for September, 1967, which is the most recent available, is 103,492, including apprentices working for local authorities and direct labour. If apprentices working for public authorities are included, the figure is approximately 130,000 apprentices in the industry as a whole. The Phelps Brown Report says that that means nearly 10 per cent. of the operative labour force and just under one-fifth of the numbers employed in the main apprenticeship trades.
7.0 p.m.
During the last few years the number of apprentices has been falling. The evidence for this is contained in the Phelps Brown Report on page 49, paragraph 130:
On the other hand, figures of the number of apprentices employed published by the Ministry of Public Building and Works show a fall of

6 per cent. between 1965 and 1966; and a further fall of 7 per cent. between 1966 and 1967. This may reflect wastage as well as the somewhat reduced entry in 1966. The N.J.C.B.I. figures of registrations of apprentices approved under the Council's scheme show a sharp drop of 15 per cent. between 1966 and 1967;
It was precisely during this period that S.E.T. was introduced.
The reasons given in the Report for the falling off are these. First, fewer boys are leaving school. Secondly, there was an increase in unemployment between 1966 and 1967 in the building and construction industries. Thirdly, there was a growth of labour-only, which is not conducive to training. The fourth reason, which is not included in the Phelps Brown Report, is the introduction of S.E.T.

Mr. Donald Williams: Will the hon. Gentleman also agree that the building industry has the highest rate of bankruptcy and closure in the country, as a result of which many apprentices are displaced and there is great difficulty in getting them back into employment because of the incidence of S.E.T.?

Mr. Heffer: I certainly agree that the industry has always suffered from bankruptcy. My criticism is that there are too many builders and it is about time that we had a publicly-owned building industry, which would be much better than the present chaotic situation. I am not now arguing for a publicly owned building industry; I am showing why there has been a reduction in the number of apprentices.

Sir Gerald Nabarro: The hon. Gentleman knows a lot about this industry. I hope to vote with him tonight, so I am encouraging him to vote with me. This "lump" business, that is, men going self-employed—are there many in the building industry and do they escape altogether from selective employment tax? Is the hon. Gentleman supporting apprentices going "lump"? That seems to me to be what he is advocating.

[Mr. HARRY GOURLAY in the Chair]

Mr. Heffer: I do not know where the hon. Gentleman has been hiding for the last ten minutes. My point is that labour-only has developed on a much more extensive scale precisely because of the introduction of S.E.T. and this upward


trend has a very bad effect on apprenticeships. I do not understand why the hon. Gentleman has made that intervention.
Training in the building industry has improved, and serious efforts are being made to tackle the training of apprentices and adults. The previous Government established the Construction Industry Training Board in July, 1964 and we took it on. It may have been deathbed repentance, but we have developed it. I pay tribute to the Board for its fine work for the industry. Employers, trade unionists, educationists and assessors from Government Departments are represented on the Board. The Board imposed on the industry a 1 per cent. levy, which brought in about £14 million. On the reverse side, the building trade employers were entitled to grants to assist in training, and for this purpose £8 million was paid out. The levy has since been reduced. It is interesting that the 1 per cent. levy was imposed to help training, whereas the imposition of S.E.T. works completely against the concept of the training programme, the levy, the Board and everything that goes with it.
The Annual Report of the Board for last year says that there are a number of firms which do not consciously undertake any training. That goes to emphasise my earlier point that more firms will consciously refuse to undertake training because any assistance they get from the Board will be offset by the payment of S.E.T.
I have not gone into the broader sphere of the application of S.E.T. to the building industry in view of the narrowness of the Amendment, but other hon. Members may take the discussion further. We are faced with a difficult situation, because we are discussing this matter without the Reddaway Report. It would have been much beter to have had this discussion after the Report was published. I should have liked, in particular, an early report, perhaps part of the overall Report, on the building industry. I hope that efforts will be made to ask Professor Reddaway to get cracking on this Report, and perhaps we can have an interim report on the building industry.

Mr. Chichester-Clark: Is the hon. Gentleman aware that it is much more

difficult than that? Professor Reddaway had the greatest difficulty in recruiting staff to help him in his inquiry into the building industry, so much so that the Ministry of Public Building and Works felt compelled to set up an inquiry of its own into the effect of S.E.T. on this industry?

Mr. Heffer: That underlines the difficulty of the situation. I say no more than that.
I do not intend to take this matter to a Division.

Sir G. Nabarro: Why not?

Mr. Heffer: Because I hope that the Minister will give me some assurances and make that unnecessary. I know that many hon. Gentlemen opposite are most anxious for a united front between myself and themselves on this matter. I should feel a lot happier if we could present a united front on many other issues, but unfortunately that does not happen, and I am therefore a little suspicious about some of their overtures at times like this.
I am not one of those who will not push things to a Division if necessary, because I am not bamboozled by the Whips or by anybody else. I hope that we shall get some tangible assurances from the Minister that something really is being done about the application of this tax to the building industry. In particular, I hope we can be assured that this tax will be lifted from apprentices at the earliest possible moment.
If we do not get those assurances, this tax will have the most serious effect on the industry in the next five or six years. The effect will not be immediate, but at the end of that time we shall find ourselves without the skilled craftsmen that our country and our industry need. I have worked in the building industry all my life, and I do not want to support something which could lead to a crisis in my industry in the next five or six years. I therefore ask the Minister to treat this, as I am treating it, in the most serious way, and I hope that we shall get some assurances this evening.

Mr. Michael Shaw: I shall speak briefly to the Amendment moved by the hon. Member for Liverpool, Walton (Mr. Haffer), because my Amendment is allied closely with it. I agree with much of what the


hon. Gentleman said. I am only sorry that he seems to be paving the way for not fulfilling the import of much of what he said. I join the hon. Gentleman in hoping that the Minister will make some really positive concessions, and nobody will be more pleased than myself if that happens.
The hon. Member for Walton has, on many occasions, expressed his objection to S.E.T., particularly as it affects the construction industry, and he has allied his Amendment with those objections in general in dealing with the position of apprentices in that idustry.
My Amendment deals with apprentices of another sort—articled clerks in the professions. I draw the Committee's attention to the fact that many of the professions are becoming busier and busier directly as a result of Government legislation. I must disclose my own interest as a chartered accountant still in practice, although many of my partners rather doubt it at times. Nevertheless, I am still in practice, and I have an interest in this matter.
Year by year, as Finance Bills go by, more and more does the country become dependent on accountants, on solicitors, on estate agents, and on other professional bodies to deal with the complicated and ambiguous legislation passed through this House. The position—ironic on reflection—is that each year taxes go up, and each year the country is forced more to consult experts on how to deal with their affairs, and in so consulting them are forced to pay more and more indirectly by way of S.E.T. for the services of the clerks and staff of these offices.
We are dealing tonight with, on the one hand, apprentices, and on the other with articled clerks, boys and girls—nay, very often men and women—in training for services which are vital for the future well-being of this country. To get back to the original purpose of S.E.T., is it really suggested that it is the desire of the Government to encourage young men and women not to become, for example accountants, but to go directly into industry? The whole tenor of the Government's legislation shows a greater and greater need for them, and therefore the need for greater encouragement to people to take up these various professions.
In effect what the hon. Member for Walton and myself are saying is that this tax, in so far as it affects apprentices and articled clerks, or indeed anyone in training, is a tax on knowledge and on training. It is therefore a tax on the future of the country. I believe that on this ground it is a tax utterly to be condemned, because, whilst it is true that in the construction industry, and in the professions particularly, all the bodies concerned are doing their best to improve training in theory, and also in practice, theoretical training is all right, but it only gets one so far; theory is important and must be learned at university or wherever it may be—theory without experience can be very dangerous indeed. Experience is absolutely vital, and I believe that those employers who undertake to train people, in whatever industry or profession it may be, should not be mulcted by this selective poll tax in the way that they are now.
I hope that if we do not get positive and satisfactory assurances from the Minister tonight we shall join in opposing the present state of affairs by voting for these Amendments.

Mr. W. S. Hilton: At the outset I want to make it clear that I would much rather you were chairing a discussion on another Amendment, Mr. Gourlay—the Amendment put down by certain Opposition Members which would provide that only self-employed people should pay selective employment tax. That Amendment has not been called, and I do not intend to start a discussion on it, but apart from the significance that it has for the training of apprentices it would have relieved the gloom in the Committee to have had an Amendment called in respect of which hon. Members on both sides could join triumphantly to force increased revenue on a reluctant Chancellor. It would mean about £30 million a year from the construction industry alone.
One of my concerns in respect of S.E.T. and training is that there appears to be no recognition on the part of the Treasury that training in our industry is not done basically at schools or colleges; we still require many operatives in order to teach apprentices. Therefore, any great move of operative strength to labour only sub-contracting decreases the total


number of men available to train apprentices. It is therefore not possible to talk cogently about apprentice training without referring to S.E.T. and its effect in driving a number of men into labour only sub-contracting in the construction industry.
I remember a discussion in the last Budget, when S.E.T. was similarly increased, when the Chief Secretary said that he did not believe that that tax or other inducements would encourage men to become labour only sub-contractors, because the industry had a high accident rate and men making that move would not be protected by insurances or legal representation by the trade unions. My concern arises from the fact that the Committee does not realise the great attraction there is for people to become labour only sub-contractors.
It is not simply a matter of avoiding the 48s. 6d. payment. Besides S.E.T. there is the cost of the National Health Insurance stamp, the industrial training levy, insurances and all the other overheads, which mean that for one man there is a payment of £5 or £6 a week. For the operative it means that the National Health Insurance contribution is not required, besides his tax payment, and altogether it can mean a difference of £9 or £10 a week to him. That applies not only in the construction industry but in almost any other industry. My hon. Friend will agree that labour only sub-contracting is now making a serious inroad into engineering. This is the picture against which we must judge the impact of the tax upon training.
When a Government increase poll taxes of this kind in respect of certain industries they are putting a high premium on good employers. It is as simple as that. If one is a good employer one is penalised to the extent of £5 or £6 a week per operative. The construction industry is a highly casual industry, not only in respect of the portion of a month during which a man is employed but also because a man may work for only three or four days in a certain week because he has not joined the firm until the Tuesday or the Wednesday. The overheads created by this poll tax amount to a considerable sum in respect of the other three or four days in the week.
The first thing that the Treasury should do is to regard seriously the attraction of this tax, plus other inducements, in making people take up labour only subcontracting. Treasury Ministers and others have argued against this point of view. They have said that there is no danger that a man will go to the labour only sub-contracting side of the industry, and therefore will not train apprentices. They have admitted that there has been a genuine reduction in the labour force in the construction industry. In other words, they say, there has been a move towards efficiency through the introduction of S.E.T.
My figures in respect of the number of operatives are slightly different from those of my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) because he dealt with the total number of people employed in the industry and I am speaking of operatives who are normally engaged in training apprentices—not managerial or technical staff. In 1966, when the tax was introduced, there were 1,102,000 operatives in the construction industry. Last year there were 1,027,000 men. In other words, there was a drop of 75,000 men. That is claimed as something of a victory for the objectives of the tax. The statistics show that there are now 250,000 men in labour only sub-contracting. I submit that the introduction of S.E.T. has not driven men out of the industry in terms of improved economy and efficiency; it has merely driven them into an evasion of tax and, in consequence, to an evasion of the things that are vital to the very make up of the industry.
The Chancellor must seriously consider any tax which not only aims at raising revenue but, as a direct consequence, seriously affects the basic make up of the industry. If we were to exempt employers from paying the tax if they trained apprentices it would cost about £5 million a year to the Treasury. At present the number of men evading taxation by being self-employed, in relation to S.E.T. alone, must represent a loss of at least £30 million a year.
My hon. Friend the Member for Walton said that the other day an Answer was given in the House to the effect that the right figure was £75 million. That figure relates to self-employment


right across the board of British industry. Up to now we have thought that self-employment and labour-only subcontracting was the major danger in the construction industry; we now find that the total amount is £75 million, or three times the evasion in the construction industry alone. The inference is that self-employment is now creeping into other industries.
The ratio varies according to the trade, but in the construction industry it is between four and six operatives to each apprentice. That was the ratio in my father's day. The 250,000 men who are in the labour only sub-contracting part of the industry are not training even one apprentice between them—never mind any question of an apprentice being trained by a small gang. Even more important, they are not paying the industrial training levy. The small and medium-sized employers who have apprentices are paying. This problem should be considered by the Chancellor and my hon. Friend in this light.
The Government's basic mistake was to lump the construction industry together with the service industries and to take S.E.T. from both. Anyone who knows anything about the industry must realise that construction is completely different from service industries and is more like manufacturing. Its national machinery, its industrial relations policies and its apprentice training methods are those of manufacturing and not those of services. As soon as it is put into the bracket of distribution and service, all these anomalies arise. Employers are faced with the training of apprentices. If an employer puts a boy on block release training courses a month or three months, any S.E.T. that he pays is not a tax on the services which he gets from the boy but a tax on education and training for replacement of manpower in the construction industry.
7.30 p.m.
Therefore, I suggest that my hon. Friend should rectify the anomaly. If we are told that that is not possible, I would ask why it was possible to exempt agriculture. S.E.T. was introduced to sort out the sheep from the goats—manufacturing from services. Nobody can tell me that, in agriculture, they are manufacturing turnips for valuable export, while in the

construction industry, in erecting a major building at London Airport, we were acting for home consumption. That is the sort of ridiculous impasse into which we get through the Standard Industrial Classification and the treatment of the construction industry. We want some cogent reply, some understanding of the problem and some assurance that something will be done.

Mr. Chichester-Clark: Like the hon. Member for Bethnal Green (Mr. Hilton), I wish that we were discussing another Amendment. I find myself going over what I said earlier. How deplorable it is that the Government have so tightly drawn the Money Resolution that we cannot discuss the construction industry in general terms. This is disgraceful especially when we are dealing with an industry employing a seventh of the work force of the country and paying—on my calculation—about 24 per cent. of the total yield from this tax.

Mr. Hilton: Not only are we the largest employing industry, but our employees are almost exclusively male, so we have to pay 100 per cent. tax on every employee.

Mr. Chichester-Clark: That is quite right. One wonders why the Money Resolution was drawn so tightly. I cannot help thinking of the time when Cobden was attacking the Corn Laws so strenuously and while he was speaking Peele turned to his Home Secretary, Graham, I think, and said, "You must answer this, for I cannot". One wonders whether the Government have not concluded that they cannot answer the argument and so are trying to avoid debate. One also wonders whether there is any example of a major tax which has been virtually doubled in all its rates within three years of its introduction.
The effect on the construction industry is particularly severe. We are now discussing an Amendment dealing with apprentices. If apprentices are being laid off or not taken on, this is because something has happened to the industry. The effect is severe, because the tax is paid without refund or premium except for some industrialised building systems which get a refund and, in development areas, attract a premium.
I agree with much of what the hon. Member for Liverpool, Walton (Mr. Heffer) said yesterday and today. He established that the tax raises £135 million from the construction industry. On one well-known occasion, I think, on 17th November, 1967, the Treasury was asked the yield of the tax from this industry and could not answer—

Mr. Heffer: It will actually be between £152 million and £155 million yield after 7th July.

Mr. Chichester-Clark: This is difficult to establish: the Government could not say, when asked, what the yield was. It is only recently—I think on 3rd April this year—that their statistical services improved sufficiently to show that £220 million had been raised from the industry, which is a useless extra cost on all construction work senselessly put on ratepayers and taxpayers.
One knows only too well what the Under-Secretary will say in answer to this debate. We have had the same answer from one Minister or another every year. He will tell us all about the great increases in productivity in the industry which S.E.T. has brought about. The Chief Secretary, as recently as 6th May, had the effrontery—

The Under-Secretary of State for Employment and Productivity (Mr. Roy Hattersley): Before the hon. Gentleman anticipates my reply any further, may I assure him that I shall say none of these things? I shall give only a reply which is relevant to the Amendment.

Mr. Chichester-Clark: I should have thought that that was a matter for you, Mr. Gourlay, and that the Under-Secretary should not give you advice on these matters.

The Deputy Chairman (Mr. Harry Gourlay): Order. I was about to intervene in the hon. Member's speech. I was allowing him to make some general remarks about the tax, but he must relate his speech now to the Amendment.

Mr. Chichester-Clark: In that case, I shall have to say, as I said before, that this is an absolutely disgraceful situation. The Money Resolution has been deliberately designed to exclude discussion of the construction industry in relation to

this tax. It has been virtually impossible to frame an Amendment which is in order. I am not criticising the Chair, but for some reason—one knows that they cannot be given—those Amendments which would have led to a proper, useful and necessary discussion of the industry have not been called. This is very unfortunate in such a large employing industry. I shall make this protest year after year until we get a proper discussion of these matters. With that, I shall now leave my remarks as they are.

The Under-Secretary of State for Employment and Productivity (Mr. Roy Hattersley): The strength of the case made by my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) rests on a series of propositions—not simply that selective employment tax is detrimental to training in the building industry, but, first, that it is crucially detrimental; second, that it is detrimental in a way that cannot be counteracted by other means; and, third, that any supposed reductions in the number of apprentices in the industry would be reversed were S.E.T. abolished for that category of workpeople.
I shall try to deal with each of these contentions, because no one would think it worthy of discussion were he simply saying that any manpower tax which is levied on the employer for each workman in his employ in itself marginally, but perhaps no more than marginally, deters the employment of any category of work persons, including apprentices. That must be true of any tax and equally of National Insurance contributions. But for my hon. Friend's case to be as strong as he believes, one must add to that the three subsidiary contentions I have outlined. These subsidiary contentions do not accord with the facts if they are carefully examined.
Before I do that I should tell the House that the Amendment would produce a net cost to revenue of £10 million. Before my hon. Friend rises to tell me that the importance of the matter is not the cost but the merits of the case, I assure him that I agree with what he must be thinking; that if the needs warrant it, the £10 million should not stand in our way. However, an examination of the facts does not warrant this sort of loss, and I say that for four reasons.
First, as my hon. Friend dealt at length, and properly so, with the problems of labour-only sub-contracting as it affects apprenticeships, he will know—I cannot go into this at length—and stay in order—that it is at least a matter of debate as to how much the introduction of S.E.T. has accelerated the increase in labour-only sub-contracting. I am able to say no more than that and remain in order. My hon. Friend will also know that it is a matter of debate as to whether that acceleration has been caused by other matters as well as S.E.T., such as National Insurance contributions, the Training Board levy, arrangements for safety and other provisions of the law.
However, one can say almost categorically that whatever effect S.E.T. has had on the increase of labour-only subcontracting—and, therefore, through labour-only sub-constracting, on the number of apprentices recruited to the industry—it has not had a crucially reducing effect. I say that with some confidence in view of what was said in the Phelps Brown Report. My hon. Friend quoted certain passages from that document, including some extracts from paragraph 131. The final sentence of that paragraph reads:
It does not therefore appear"—
I will not weary the House with the reasoning which justified the use of the word "therefore"—
that there is a close relationship between labour-only and recruitment of apprentices.
I am prepared to stand by that judgment.

Mr. Speed: Is it not true that that Report came out in July, 1968, before the massive increase in S.E.T. in September, 1968 and before the increase which we are discussing? Does not this mean that what the hon. Gentleman is saying is already a little old hat and that the situation has deteriorated since then?

Mr. Hattersley: It was kind of the hon. Gentleman not to remind my hon. Friend the Member for Liverpool, Walton of the outdated character of the Phelps Brown Report when my hon. Friend was quoting from it in favour of the Amendment. However, it was equally kind of him to remind me that he believes it to be outdated when I am quoting from it in opposition to the Amendment.
I intend to say something about the future. The only point I am seeking to make at present is that the only analysis of labour-only sub-contracting which is at our disposal—the Phelps Brown Report which is a comparatively recent document to which the Government are committed and on which they intend to act—draws the conclusion that it would be wrong to assume that as labour-only subcontracting increases, so the number of apprentices falls. I stand by that contention.
How, then, since that is not the contradictory factor, do we account for the figures which my hon. Friend the Member for Liverpool, Walton gave when introducing the Amendment; a gross fall in the number of apprenticeships in the industry—a crude figure of the reduction in the number of boys who have been taking up apprenticeships?
As my hon. Friend the Member for Liverpool, Walton said, the principal cause of this phenomenon is to be found in the same paragraph 131 of the Phelps Brown Report. It is the simple fact—there is a special fact, too, concerning this industry—applying to all industries during the period which my hon. Friend discussed. During that period the number of boys leaving school fell. Indeed, the number of boys, in crude terms, going into apprenticeships in industry as a whole fell for every industry during that period.

Mr. Heffer: If one studies the Phelps Brown Report one finds many qualifying phrases like "It is not clear" and "Therefore it does not appear". There are no clear categorical statements saying that there is not a definite relationship between labour-only and this trend. If one reads further into the Phelps Brown Report—about, for example, the question of training—one finds this comment on page 136.
It is true that in our survey there tended to be less apprentices per firm among firms using labour-only than among other firms, but the difference was not particularly marked, and of course there are many other factors affecting the situation.
I would take that to be definite evidence that labour-only leads to a reduction in apprenticeship training. I suggest that there is no question about it, despite what my hon. Friend has said.

7.45 p.m.

Mr. Hattersley: I am surprised if my hon. Friend is normally prepared to accept evidence offered in such a tentative form; indeed, evidence offered in a purely negative form. I would have thought that he would have wished to have substantiated his general conclusion on apprenticeships with the passage which I quoted and which, I am sure, hon. Members will wish to bear in mind.
Be that as it may, I offer my hon. Friend some precise facts about the level of apprenticeships in the industry. When he quoted the gross figures I think that he was not quoting figures which give the best picture of the apprenticeship position. I offer two sets of figures. The first concerns the number of boys obtaining apprenticeships in the industry between 1963 and 1968. There was certainly a decline in gross terms, of about 4 per cent., but the industry as a whole was contracting, certainly towards the end of that period. It was, incidentally, declining at a rate so fast that it could not be attributed entirely, or in the main, to the increase in labour-only subcontracting.
But while during that period the number of apprenticeships was being reduced, as was the total manpower of the industry, the percentage of new entrants into the industry who were taking up apprenticeships was increasing. In fact, in 1963 rather more than 63 per cent. of all young men going into the industry took up apprenticeships. By 1968 more than 72 per cent. of all young men going into the industry took up apprenticeships.
That increase of 10 per cent. in the level of apprentices as a proportion of new entrants into the industry is indicative of the improved and improving training standards in the industry, as in most industries since 1964. This is in no small measure the result of the work of the Construction Industry Training Board to which my hon. Friend the Member for Walton referred in complimentary terms. The Board's endeavours have been extremely succesful, not only in increasing the quantity of training in the industry but in improving the quality of it.
I give my hon. Friend an absolute assurance that it is neither the Board's intention nor mine nor that of my right hon. Friend that its efforts should be so

geared that adult retrainees or adult trainees should take the place of apprentices trained in something like the traditional manner, and I emphasise that latter remark.
My hon. Friend did less than credit to the many men who spend time in Government training centres and who then go on to take a period of related experience outside to become craftsmen of a high calibre. The Board understands that while we need to improve the techniques of apprenticeships and change some of the attitudes towards training in the industry, the majority of craftsmen employed in the foreseeable future must be recruited and trained in something like the traditional way.
The figures I quoted—the increasing proportion of young men going into the industry and taking apprenticeships—shows the success which the Board has had in bringing that situation about and the fact that it has not been prevented from doing that altogether necessary job by external means, and by S.E.T. in particular.
My hon. Friend the Member for Liverpool, Walton and my hon. Friend the Member for Bethnal Green (Mr. Hilton) went on to conclude, and rightly so, that an employer required to pay a sum for each apprentice on his books would naturally be reluctant to take on additional apprentices if he was obtaining from them very little productive work. It was specifically my hon. Friend the Member for Bethnal Green who asked me to consider the position of an employer who, while reconciled to making his S.E.T. contributions for an employee engaged in a productive activity, would be more than reluctant to do so if one of his employees was constantly not available for work or was involved in a job which had no genuine direct productive content. I am sure that my hon. Friend the Member for Walton will confirm that throughout their apprenticeships very many building industry apprentices make a very substantial contribution to productive work.
My hon. Friend told us that his apprenticeship lasted seven years. There is no training authority or anyone with practical training experience—and I suspect that that includes my hon. Friend—who genuinely believes that the techniques of learning alone take seven years.


Much of the time is spent in productive activity, though there are training activities where this general rule does not apply.
We accepted at the beginning of the selective employment tax that there was a conceivable situation in which a young man would need to go, would want to go, and would be capable of going for some extended period of off-the-job training but that his employer would be reluctant to send him on the course because, although producing nothing to the firm, he would be a charge against selective employment tax. For that reason, my right hon. Friend the then Chancellor of the Exchequer agreed with the industrial training boards to make specific refunds of selective employment tax to young men who were going on three types of courses.
The first type consisted of apprentices undergoing full-time, off-the-job training or education. The second concerned those involved in works-based sandwich courses; that is to say, students undergoing a period of theoretical instruction. The third consisted of students undergoing a university course as part of sandwich arrangements. Those young men were clearly not a productive element to the firm or a legitimate charge for selective employment tax.
That being so, we thought then, and we confirm our continued belief, that that concession should be made. But our examination of the figures and of the level of training in the industry as a whole does not suggest that, at the moment, any further concession can be justified on any of the criteria I have laid down, or by any of the evidence presented today.
I assure the hon. Member for Meriden (Mr. Speed) that the Government will keep very closely under review the situation to which he has drawn attention. Clearly, if the selective employment tax has a marginal effect, when it is increased the effect is less marginal. The hon. Gentleman will know, as will my hon. Friend the Member for Walton, the devotion of this Government to industrial training and education. With that general principle in mind, we undertake to keep the position under review but, at the moment, I cannot advise the Committee to agree to the Amendment.

Mr. Ian MacArthur: Before the Minister sits down, will he not refer to the Amendment seeking to alter the effect of selective employment tax in relation to articled clerks, which Amendment was supported by a powerful argument exposing the wretchedness of the tax in this connection?

Mr. Hattersley: The figures I gave concerned the Amendment which was moved, but the general rules and the general criteria are equally applicable to both Amendments. As the hon. Gentleman asked me to confirm it, I ask the Committee to reject both Amendments.

Mr. Speed: On a point of order, Mr. Gourlay. I should like your advice. A number of us have tried by our Amendments to widen the scope of the discussion of the incidence of the selective employment tax in the construction industry. We represent many builders and construction people. We find the situation quite impossible. Of course, we do not seek to criticise you or the Chair, but could you guide us how, on a future occasion, we may be able to discuss the tax in relation to the industry and yet keep the discussion within the confines of the Finance Bill?

Mr. Heffer: I do not want to say that in view of any assurance I have had from the Minister—

The Deputy Chairman: Order. I thought that the hon. Member for Liverpool, Walton (Mr. Heffer) was seeking to make a further point of order. If he is not, perhaps I may be allowed to deal with the point of order raised by the hon. Member for Meriden (Mr. Speed). That point of order related to the selection of Amendments. The Chair has not selected the Amendments referred to, so that it would not be in order to debate them now. I am afraid that I cannot help the hon. Gentleman to widen the debate in that way.

Mr. Heffer: I am very disappointed by the Minister's reply, and have had no real assurance that anything will be done. This debate is on a very narrow problem. I should have liked the debate to have been much wider and to have involved, in particular, the whole question of labour-only sub-contracting. My


difficulty is that I could press the Amendment to a Division, but it is not a particularly responsible attitude merely to waste the time of the Committee—[HON. MEMBERS: "No."] In the circumstances, I feel that I shall have to ask leave to withdraw the Amendment, but I do so, and I want this to be known, extremely reluctantly. The hon. Member for Meriden (Mr. Speed) has referred to the difficulty there is in having a full-scale discussion on the whole subject of the construction and building industry. On that basis, Mr. Gourley, I beg to ask leave to withdraw the Amendment.

Hon. Members: No.

Mr. Chichester-Clark: On a point of order, Mr. Gourley. In view of what

has just been said by the hon. Member for Liverpool, Walton (Mr. Heffer), that he had had to employ what was virtually a device to try to get a discussion of the selective employment tax and the building industry, and in view of my hon. Friends' representations, would you, on this occasion, make an exception by telling us why some of the Amendments on the wider point are not in order?

The Deputy Chairman: The Chair is not under any obligation to disclose its reasons for selecting or not selecting Amendments.

Question put, That the Amendment be made:—

The Committee divided: Ayes 214, Noes 250.

Division No. 227.]
AYES
[7.58 p.m.


Alison, Michael (Barkston Ash)
Digby, Simon Wingfield
Johnson Smith, G. (E. Grinstead)


Allason, James (Hemel Hempstead)
Dodds-Parker, Douglas
Jones, Arthur (Northants, S.)


Amery, Rt. Hn. Julian
Doughty, Charles
Jopling, Michael


Atkins, Humphrey (M't'n &amp; M'd'n)
Drayson, G. B.
Kaberry, Sir Donald


Awdry, Daniel
du Cann, Rt. Hn. Edward
Kerby, Capt. Henry


Baker, Kenneth (Acton)
Eden, Sir John
Kershaw, Anthony


Baker, W. H. K. (Banff)
Elliot, Capt. Walter (Carshalton)
King, Evelyn (Dorset, S.)


Balniel, Lord
Elliott, R. W. (N'c'tle-upon-Tyne, N.)
Kirk, Peter


Barber, Rt. Hn. Anthony
Emery, Peter
Knight, Mrs. Jill


Batsford, Brian
Errington, Sir Eric
Lambton, viscount


Beamish, Col. Sir Tufton
Ewing, Mrs. Winifred
Lancaster, Col. C. G.


Bell, Ronald
Eyre, Reginald
Lane, David


Bennett, Dr. Reginald (Gos. &amp; Fhm)
Farr, John
Legge-Bourke, Sir Harry


Berry, Hn. Anthony
Fortescue, Tim
Lewis, Kenneth (Rutland)


Bessell, Peter
Foster, Sir John
Lloyd, Rt. Hn. Geoffrey (Sut'n C'dfield)


Biffen, John
Galbraith, Hn. T. G.
Lloyd, Ian (P'tsm'th, Langstone)


Biggs-Davison, John
Gilmour, Ian (Norfolk, C.)
Lloyd, Rr. Hn. Selwyn (Wirral)


Birch, Rt. Hn. Nigel
Glover, Sir Douglas
Longden, Gilbert


Blaker, Peter
Glyn, Sir Richard
Lubbock, Eric


Boardman, Tom (Leicester, S. W.)
Godbar, Rt. Hn. J. B.
McAdden, Sir Stephen


Body, Richard
Goodhart, Philip
MacArthur, Ian


Boyle, Rt. Hn. Sir Edward
Goodhew, Victor
Maclean, Sir Fitzroy


Braine, Bernard
Gower, Raymond
Macleod, Rt. Hn. Iain


Brewis, John
Grant-Ferris, R.
McMaster, Stanley


Brinton, Sir Tatton
Gresham Cooke, R.
Macmillan, Maurice (Farnham)


Bromley-Davenport, Lt.-Col. Sir Walter
Grieve, Percy
McNair-Wilson, Michael (W'stow, E.)


Brown, Sir Edward (Bath)
Grimond, Rt. Hn. J.
McNair-Wilson, Patrick (New Forest)


Bruce-Gardyne, J.
Gurden, Harold
Maddan, Martin


Buchanan-Smith, Alick (Angus, N &amp; M)
Hall, John (Wycombe)
Maginnis, John E.


Buck, Antony (Colchester)
Hall-Davis, A. G. F.
Marples, Rt. Hn. Ernest


Bullus, Sir Eric
Hamilton, Lord (Fermanagh)
Marten, Neil


Burden, F. A.
Hamilton, Michael (Salisbury)
Maude, Angus


Campbell, B. (Oldham, W.)
Harris, Frederic (Croydon, N. W.)
Maxwell-Hyslop, R. J.


Campbell, Gordon (Moray &amp; Nairn)
Harris, Reader (Heston)
Maydon, Lt.-Cmdr. S. L. C.


Channon, H. P. G.
Harrison, Brian (Maldon)
Mills, Peter (Torrington)


Chichester-Clark, R.
Harrison, Col. Sir Harwood (Eye)
Mills, Stratton (Belfast, N.)


Clark, Henry
Harvey, Sir Arthur Vere
Miscampbell, Norman


Clegg, Walter
Harvie Anderson, Miss
Mitchell, David (Basingstoke)


Cooke, Robert
Hastings, Stephen
Monro, Hector


Cordle, John
Hawkins, Paul
More, Jasper


Corfield, F. V.
Hay, John
Morgan-Giles, Rear-Adm.


Costain, A. P.
Hesoltine, Michael
Morrison, Charles (Devizes)


Craddock, Sir Beresford (Spelthorne)
Higgins, Terrence L.
Munro-Lucas-Tooth, Sir Hugh


Crouch, David
Hiley, Joseph
Murton, Oscar


Crowder, F. P.
Hill, J. E. B.
Nabarro, Sir Gerald


Cunningham, Sir Knox
Hogg, Rt. Hn. Quintin
Neave, Airey


Currie, G. B. H.
Holland, Philip
Noble, Rt. Hn. Michael


Dalkeith, Earl of
Hordern, Peter
Nott, John


Dance, James
Hunt, John
Onslow, Cranley


d'Avisdor-Goldsmid, Sir Henry
Hutchison, Michael Clark
Orr, Capt. L. P. S.


Dean, Paul
Iremonger, T. L.
Osborn, John (Hallam)


Deedee, Rt. Hn. W. F. (Ashford)
Jenkin, Patrick (Woodford)
Osborne, Sir Cyril (Louth)




Page, Graham (Crosby)
Scott, Nicholas
Vickers, Dame Joan


Peel, John
Scott-Hopkins, James
Waddington, David


Percival, Ian
Sharples, Richard
Walker, Peter (Worcester)


Peyton, John
Shaw, Michael (Sc'b'sh &amp; Whitby)
Walker-Smith, Rt. Hn. Sir Derek


Pink, R. Bonner
Silvester, Frederick
Wall, Patrick


Pounder, Rafton
Sinclair, Sir George
Walters, Dennis


Price, David (Eastleigh)
Smith, Dudley (W'wick &amp; L'mington)
Ward, Dame Irene


Prior, J. M. L.
Smith, John (London &amp; W'minster)
Wells, John (Maidstone)


Pym, Francis
Speed, Keith
Wiggin, A. W.


Quennell, Miss J. M.
Stainton, Keith
Williams, Donald (Dudley)


Ramsden, Rt. Hn. James
Steel, David (Roxburgh)
Wilson, Geoffrey (Truro)


Rawlinson, Rt. Hn. Sir Peter
Stodart, Anthony
Wood, Rt. Hn. Richard


Rees-Davies, W. R.
Stoddart-Scott, Col. Sir M.
Woodnutt, Mark


Renton, Rt. Hn. Sir David
Summers, Sir Spencer
Worsley, Marcus


Rhys Williams, Sir Brandon
Tapsell, Peter
Wright, Esmond


Ridley, Hn. Nicholas
Taylor, Sir Charles (Eastbourne)
Younger, Hn. George


Ridsdale, Julian
Taylor, Edward M. (G'gow, Cathcart)



Rossi, Hugh (Hornsey)
Temple, John M.
TELLERS FOR THE AYES:


Royle, Anthony
Thatcher, Mrs. Margaret
Mr. Timothy Kitson and


Russell, Sir Ronald
Thorpe, Rt. Hn. Jeremy
Mr. Bernard Weatherill.


Sandys, Rt. Hn. D.
Turton, Rt. Hn. R. H.





NOES


Albu, Austen
Eadie, Alex
Jenkins, Hugh (Putney)


Allaun, Frank (Salford, E.)
Edelman, Maurice
Jenkins, Rt. Hn. Roy (Stechford)


Alldritt, Walter
Edwards, Robert (Bilston)
Johnson, Carol (Lewisham, S.)


Anderson, Donald
Ellis, John
Johnson, James (K'ston-on-Hull, W.)


Archer, Peter
English, Michael
Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)


Ashley, Jack
Ennals, David
Jones, J. Idwal (Wrexham)


Ashton, Joe (Bassetlaw)
Ensor, David
Jones, T. Alec (Rhondda, West)


Atkins, Ronald (Preston, N.)
Evans, Ioan L. (Birm'h'm, Yardley)
Kelley, Richard


Atkinson, Norman (Tottenham)
Faulds, Andrew
Kerr, Russell (Feltham)


Bacon, Rt. Hn. Alice
Fernyhough, E.
Lawson, George


Bagier, Gordon A. T.
Finch, Harold
Leadbitter, Ted


Barnett, Joel
Fitch, Alan (Wigan)
Lee, Rt. Hn. Frederick (Newton)


Beaney, Alan
Fitt, Gerard (Belfast, W.)
Lee, John (Reading)


Bence, Cyril
Fletcher, Rt. Hn. Sir Eric (Islington, E.)
Lestor, Miss Joan


Benn, Rt. Hn. Anthony Wedgwood
Fletcher, Raymond (Ilkeston)
Lever, Harold (Cheetham)


Bidwell, Sydney
Fletcher, Ted (Darlington)
Lever, L. M. (Ardwick)


Binns, John
Foley, Maurice
Lewis, Arthur (W. Ham, N.)


Bishop, E. S.
Foot, Rt. Hn. Sir Dingle (Ipswich)
Lewis, Ron (Carlisle)


Blackburn, F.
Foot, Michael (Ebbw Vale)
Lomas, Kenneth


Blenkinsop, Arthur
Ford, Ben
Loughlin, Charles


Booth, Albert
Forrester, John
Luard, Evan


Boston, Terence
Fowler, Gerry
Lyon, Alexander W. (York)


Bottomley, Rt. Hn. Arthur
Fraser, John (Norwood)
Lyons, Edward (Bradford, E.)


Boyden, James
Freeson, Reginald
Mabon, Dr. J. Dickson


Bradley, Tom
Galpern, Sir Myer
MacColl, James


Bray, Dr. Jeremy
Gardner, Tony
Macdonald, A. H.


Brooks, Edwin
Garrett, W. E.
McGuire, Michael


Brown, Rt. Hn. George (Belper)
Gordon Walher, Rt. Hn. P. c.
McKay, Mrs. Margaret


Brown, Hugh D. (G'gow, Provan)
Gray, Dr. Hugh (Yarmouth)
Mackenzie, Gregor (Rutherglen)


Brown, Bob (N'c'tle-upon-Tyne, W.)
Greenwood, Rt. Hn. Anthony
Mackie, John


Brown, R. W. (Shoreditch &amp; F'bury)
Grey, Charles (Durham)
Mackintosh, John P.


Buchan, Norman
Griffiths, David (Rother Valley)
Maclennan, Robert


Buchanan, Richard (G'gow, Sp'burn)
Griffiths, Eddie (Brightside)
McMillan, Tom (Glasgow, C.)


Butler, Herbert (Hackney, C.)
Griffiths, Rt. Hn. James (Llanelly)
McNamara, J. Kevin


Callaghan, Rt. Hn. James
Griffiths, WIN (Exchange)
MacPherson, Malcolm


Cant, R. B.
Gunter, Rt. Hn. R. J.
Mallalieu, E. L. (Brigg)


Carmichael, Neil
Hamilton, James (Bothwell)
Mallalieu, J. P. W. (Huddersfield, E.)


Castle, Rt. Hn. Barbara
Hamilton, William (Fife, W.)
Manuel, Archie


Chapman, Donald
Hannan, William
Mapp, Charles


Coe, Denis
Harper, Joseph
Marks, Kenneth


Coleman, Donald
Harrison, Walter (Wakefield)
Marquand, David


Corbet, Mrs. Freda
Hattereley, Roy
Marsh, Rt. Hn. Richard


Crawshaw, Richard
Hazell, Bert
Mason, Rt. Hn. Roy


Crosland, Rt. Hn. Anthony
Healey, Rt. Hn. Denis
Mellish, Rt. Hn. Robert


Darling, Rt. Hn. George
Herbison, Rt. Hn. Margaret
Mendelson, John


Davidson, Arthur (Accrington)
Hobden, Dennis
Mikardo, Ian


Davies, G. Elfed (Rhondda, E.)
Hooley, Frank
Millan, Bruoe


Davies, Dr. Ernest (Stretford)
Houghton, Rt. Hn. Douglas
Miller, Dr. M. S.


Davres, Ifor (Gower)
Howell, Denis (Small Heath)
Milne, Edward (Blyth)


de Freitas, Rt. Hn. Sir Geoffrey
Howie, W.
Molloy, William


Delargy, Hugh
Hoy, James
Morgan, Elystan (Cardiganshire)


Dell, Edmund
Huckfield, Leslie
Morris, Charles R. (Openshaw)


Dempsey, James
Hughes, Rt. Hn. Cledwyn (Anglesey)
Morris, John (Aberavon)


Diamond, Rt. Hn. John
Hughes, Hector (Aberdeen, N.)
Moyle, Roland


Dickens, James
Hunter, Adam
Mulley, Rt. Hn. Frederick


Dobson, Ray
Janner, Sir Barnett
Murray, Albert


Doig, Peter
Jay, Rt. Hn. Douglas
Neal, Harold


Dunnett, Jack
Jeger, George (Goole)
Noel-Baker, Rt. Hn. Philip


Dun woody, Mrs. Gwyneth (Exeter)
Jeger, Mrs. Lena (H'b'n &amp; St. P'cras, S.)
Oakes, Gordon







Ogden, Eric
Robertson, John (Paisley)
Tuck, Raphael


Oram, Albert E.
Robinson, Rt. Hn. Kenneth (St. P'c'as)
Urwin, T. W.


Orbach, Maurice
Rodgers, William (Stockton)
Varley, Eric G.


Orme, Stanley
Roebuck, Roy
Wainwright, Edwin (Dearne Valley)


Oswald, Thomas
Rogers, George (Kensington, N.)
Walker, Harold (Doncaster)


Owen, Will (Morpeth)
Ryan, John
Wallace, George


Padley, Walter
Shaw, Arnold (Ilford, S.)
Watkins, David (Consett)


Page, Derek (King's Lynn)
Sheldon, Robert
Watkins, Tudor (Brecon &amp; Radnor)


Pannell, Rt. Hn. Charles
Shinwell, Rt. Hn. E.
Wellbeloved, James


Parker, John (Dagenham)
Shore, Rt. Hn. Peter (Stepney)
White, Mrs. Eirene


Parkin, Ben (Paddington, N.)
Short, Mrs. Renée (W'hampton, N. E.)
Whitlock, William


Parkin, Brian (Bedford)
Silkin, Rt. Hn. John (Deptford)
Wilkins, W. A.


Pavitt, Laurence
Silkin, Hn. S. C. (Dulwich)
Willey, Rt. Hn. Frederick


Pearson, Arthur (Pontypridd)
Skeffington, Arthur
Williams, Alan Lee (Hornchurch)


Peart, Rt. Hn. Fred
Slater, Joseph
Williams, Clifford (Abertillery)


Pentand, Norman
Small, William
Williams, Mrs. Shirley (Hitchin)



Spriggs, Leslie
Williams, W. T. (Warrington)


Perry, George H. (Nottingham, S.)
Steele, Thomas (Dunbartonshire, W.)
Willis, Rt. Hn. George


Prentice, Rt. Hn. R. E.
Strauss, Rt. Hn. G. R.
Wilson, William (Coventry, S.)


Price, Thomas (Westhoughton)
Summerskill, Hn. Dr. Shirley
Winnick, David


Probert, Arthur
Swain, Thomas
Woof, Robert


Rankin, John
Taverne, Dick
Wyatt, Woodrow


Rees, Merlyn
Thomas, Rt. Hn. George



Roberts, Albert (Normanton)
Thomson, Rt. Hn, George
TELLERS FOR THE NOES:


Roberts, Rt. Hn, Goronwy
Tinn, James
Mr. John McCann and


Roberts, Gwilym (Bedfordshire, S.)
Tomney, Frank
Mr. Neil McBride.

Clause ordered to stand part of the Bill.

Schedule 6

AMENDMENTS TO PART I OF SCHEDULE 1 TO PURCHASE TAX ACT 1963

Mr. Higgins: I beg to move Amendment No. 44, in page 74, line 20, leave out paragraph 1.
I think that it would be as well if I were to explain the precise content of the Amendment. Earlier today the Chief Secretary made a statement to the Committee about the provision of documents which are necessary in connection with the debates on which we are engaged on any particular day. We fully appreciate the right hon. Gentleman's desire to ensure that events outside Parliament should not prevent the provision of papers which are necessary to enable the Committee to carry out its duties.
However, we were right in questioning the right hon. Gentleman to ask him for an assurance, not merely that papers were available which were immediately current and relevant to a particular debate, but also that others papers which were connected with the matters we were debating were available. I asked the Chief Secretary whether the Purchase Tax Act, 1963, was available in the Vote Office. It transpired that it was not, even though the relevance of this Act to this Amendment and to the whole of the discussion we shall be having on purchase tax is clear. I am glad that, in subsequent discussion, the right hon. Gentleman assured me that he would bear the point

closely in mind on any future occasion and ensure that both the immediate papers were available and also the other documents necessary for the interpretation of those papers.
As the Purchase Tax Act, 1963, particularly in its considerably amended form, is not generally available to the Committee, I shall explain the precise effect of Amendment No. 44. The paragraph which we wish to delete reads:
In Group 2, paragraphs (1), (2) and (3) of the exemptions shall be omitted.
Turning to Schedule 1 of the Purchase Tax Act, 1963, to which reference is there made, one finds that the following items would thus no longer be omitted from charge to purchase tax:

"(1) Sewing thread, and mending and knitting wool.
(2) Sewing and darning needles, knitting needles, bodkins, crochet hooks, pins of base metal … thimbles, finger shields for needlework and tape measures.
(3) Paper patterns."

Thus, the Government now propose to bring those items into the purchase tax range. We oppose such a move. It was first alluded to by the Chancellor of the Exchequer in his Budget speech:
To put the point more generally, I do not think that the distinction between floor coverings, mattresses, cushions, furniture and clothing—which are taxed—and household textiles and cloth—which are not taxed—is a valid one. I therefore propose to bring in the latter category, as well as plastic wall-covering, knitting wool and sewing and dressmaking requisites".—[OFFICIAL REPORT, 15th April, 1969; Vol. 781, c. 1023.]


There is something of a non sequitur there because the antithesis which the right hon. Gentleman initially drew between the items taxed and not taxed did not include the items the subject of the Amendment, and, in particular, knitting wool in all its forms and uses. We have had no justification yet from the Treasury Bench, either in the debates on the Budget or on Second Reading of the Bill, for the inclusion of these items.
We regard the Government's proposal as retrograde. Successive Chancellors have always recognised that items of this kind—which one may broadly describe as "do it yourself" items—should be exempt from purchase tax. That must be right, because many of the people who use knitting wool, sewing thread or paper patterns are in the lowest income groups, those who can least afford to bear taxation and who sometimes of necessity knit their own clothes or their children's clothes in order to economise.
It has been estimated that about 75 per cent. of the hand knitting yarn which is used goes to what are called in the jargon socio-economic classes C2, C1 and D, the lowest economic classes. This means that the Government, who are shedding crocodile tears about the lowest paid workers and those who are really suffering from inflation, are none the less imposing a tax which will fall severely on the lowest paid.
Among the lowest paid, young married couples will inevitably feel the effect of the tax most severely. Young married women knit for their children and for themselves both in order to economise and also, I think, because, to some extent, as the Americans would say, it personalises the objective. I hesitate to declare an interest here in my 9-month old daughter, but perhaps I should.
I was astounded by some of the statistics in this connection. I had not appreciated that about 60 million garments are hand-knitted annually in nonworking hours in the United Kingdom. That is a startling statistic. But there is another point to be made in the same connection. If all those people were to stop knitting tomorrow and the 60 million garments were not constructed—if that be the right expression—the gross national product would not alter one iota. Similarly, if they double their output, the gross national product would not alter one iota.
8.15 p.m.
I had occasion to say yesterday that the Chancellor is becoming more and more preoccupied with economic indicators and statistics and less and less with the realities of the situation. In the debates on the selective employment tax, I pointed out that his arguments about the cost of living really applied with any validity only to the cost of living index, not to the true cost of living. In this case now, the Government are imposing a burden which will leave the apparent growth, if there be any, in the gross national product where it is but will lead to a real deterioration in the personal satisfaction and actual well being of a large number of families.
The Financial Secretary to the Treasury is always sympathetic in this kind of matter. I hope that he will tell us that the Chancellor has had second thoughts and is prepared to accept our Amendment. I return to a theme which I pressed throughout our debates on the S.E.T. Despite the Chancellor's avowed intention to do everything he can to balance Britain's payments, almost every individual item in the Budget has an adverse effect on the balance of payments. The provision which we seek to delete now is no exception. If there is some reduction in the number of items knitted—one must, surely, assume that there will be some such reduction as a result of the tax—it is likely that instead of, say, children's clothes being knitted by their mothers, they will be imported as made-up goods from overseas for purchase by those women, thus adding to our import bill, and will not, I understand—the Financial Secretary will, no doubt, confirm it—be taxed.
Clearly, therefore, the balance of payments will suffer, and this is not something to be overlooked. There will be a deterioration in the overall position.
There will be an increase in the imports of other made-up goods, and there will be a reduction in the home demand for hand knitting yarns, a reduction which will not be offset by greater export sales because tariffs and import restrictions in overseas markets prevent manufacturers of wool yarn who might reasonably have sold in the home market from exporting it. Thus, we shall not find a corresponding increase in exports as a result of the depression of the


home market, if that is what is in the back of the Chancellor's mind.
On all those grounds, the Amendment should be supported. The industry is an important one. There are about 250,000 people employed directly or indirectly in the production of hand knitting yarns, which has for many years been a staple item of our trade—perhaps going back to the Woolsack, I suppose. It has been of particular importance in the development areas, which the Government say they are trying to stimulate, and in the grey areas too, the problems of which have been analysed in the Hunt Report, although, apparently, the Government do not propose to do anything to take action in that matter.
There is a final anomaly. I understand that it will arise because purchase tax will be applicable to yarns used for the hand knitting of babies' and young children's garments whereas machine-made garments will not be subject to it.

The Financial Secretary to the Treasury (Mr. Harold Lever): indicated assent.

Mr. Higgins: I am glad to have the hon. Gentleman's confirmation. There will thus be an anomaly as between children's garments which are hand knitted and subject to tax and those which are machine made and not subject to tax. That is an odd anomaly to create. We cannot understand the thinking which has gone on between the Chancellor and his colleagues on this matter. I hope that I have made a substantial case. My hon. Friend the Member for Pudsey (Mr. Hiley), who added his name to the Amendment and has both a constituency interest and great expertise in the matter, will no doubt make a more detailed and substantial case if he is fortunate enough to catch your eye, Mr. Gourlay, perhaps just before the hon. Gentleman replies. I hope the Committee appreciates that considerable interests are involved in this matter and we hope for a sympathetic reply.

The Deputy Chairman (Mr. Harry Gourlay): Before I propose the Question, I should indicate that it may be convenient to the Committee to discuss with Amendment No. 44 the following three Amendments on the Order Paper: No.

118, in page 74, line 20, leave out '(2) and (3)' and insert 'and (2)' and No. 119, in line 20, after '(2)', insert:
'unless such materials are used by disabled persons or those undergoing courses of rehabilitation';
both standing in the name of the hon. Member for Bodmin (Mr. Bessell) and the names of his hon. Friends, and No. 100, in line 21, at end insert:
'and the following words inserted "sewing and darning needles, knitting needles, bodkins, crochet hooks, thimbles, finger shields for needlework, and tape measures"';
standing in the name of the hon. Member for Bromsgrove (Mr. Dance).

Mr. Peter Bessell: I support Amendment No. 44, so ably moved by the hon. Member for Worthing (Mr. Higgins), who has established an argument which will be impossible for the Financial Secretary to refute. I do not propose to cover the ground he has dealt with so cogently. The purpose of Amendments No. 118 and 119 is quite evident and I need not waste much time of them. They were put down as a sort of step backwards from Amendment No. 44 in the hope that, if we cannot have a whole loaf, we may at least have two or three slices.
I am concerned, as the hon. Member for Worthing is, that paragraph 1 should be removed entirely and for the reasons he stated. To retain it would have an unfortunate result not only for the industry as a whole but in particular for certain persons in a special position. I have tried to set this out in Amendment No. 119 because the Financial Secretary will be aware that there are many occasions when knitting wool and similar materials, which are included in the Group 2 exemption in Schedule 1 of the 1963 Act, are used by people undergoing rehabilitation. They are used by persons who are blind or incapacitated in other ways.
Perhaps the hon. Member for Derbyshire, West (Mr. Scott-Hopkins) will recall the days when he was the Member for Cornwall, North and travelled by train from the West Country. He may remember seeing a gentleman who frequently travels on the train. This gentleman is elderly and blind and he knits throughout the journey. He is a charming old gentleman. He knits about 15 ozs. of wool a week and I believe that that is


a large amount. It is the thing which keeps him occupied. I am sure that he is not alone in that. I am sure that many blind or disabled people, or people in old people's homes or who are confined to their houses, take up sewing or knitting as a recreation—quite apart from the fact that they contribute something of considerable use to society. Many Liberal, Conservative and Labour Party fetes would suffer were it not for the knitting and sewing done by worthy ladies. But, of course, much more important is the work done for charities.
The most significant aspect, however, is the rehabilitation of those who have suffered accidents have been victims of war or have suffered from serious illnesses, who find in this activity not just a recreation but a means whereby they can re-establish contact with the world. Any one who has seen some of the homes where knitting and sewing and so forth are done by men and women alike as part of a rehabilitation programme will think, as I do, that it is absurd, if not monstrous, that purchase tax should suddenly be charged on the materials these unfortunate people use and which help to make their life a little easier and simpler and to rehabilitate them and bring them back into society.
There is a serious objection to the entire proposal contained in this part of the Bill and it can be summed up by saying that, no matter what difficulties the country may be in economically—and I accept that the Government have to take strong action—it is simply playing with the problem to start scratching around in corners to find odd bits of dust or odd items which can be picked out.
No doubt the hon. Gentleman will tell us what is the total sum involved but it cannot be a sum sufficient to restore the economy or to have any lasting effect upon our balance of payments or to reduce the spending power of the public to the extent where there would be a massive improvement in our exports—indeed, in any of the things to which the Government must look if they are to resolve our deep rooted problems.
This proposal is an absurdity. It is not even taking financial matters seriously to start imposing purchase tax on items which in the past have been rightly exempt because they have a special social

use or may have an even more important use in the sense that they can provide considerable help to certain people.
I notice that the exempt list in Group 2(4) will retain "Articles knitted or crocheted by hand without mechanical aid …" What is "mechanical aid"? I return to the blind man on the train. Because he is blind he is forced to use a machine to do his knitting. Will he be one of those who will therefore be required to pay purchase tax on the wool he uses? Will the woman in her own home who uses a knitting machine be required to pay purchase tax? Or will it transpire that there will be total exemption for those who knit entirely manually, while those who use special equipment in their own homes, or in hospitals for rehabilitation, will have to pay purchase tax? Or will it be confined to factories and other places where this work is done as a distinct industry? That is the important distinction which must be drawn.
It seems utterly absurd that purchase tax should be charged on a paper pattern. Will this mean that when one of the ladies' magazines which are sold on bookstalls chooses to give away a paper pattern in a weekly issue, if the normal charge for the magazine is 2s., it will have to be 2s. 1½d., or something like that, to cover the purchase tax on the paper pattern? This is the sort of question which must be answered. There are many other instances of paper patterns being virtually gifts, or being sold at low prices.
I support the Amendment of the hon. Member for Worthing, but if that cannot be accepted, and I trust that the Committee will accept it, I hope that serious consideration will be given to the two Amendments which I have mentioned, particularly No. 119. Without the Amendments this provision will cause needless suffering and expense to those who should be allowed the use of these materials for purposes which are social within themselves.

8.30 p.m.

Mr. James Scott-Hopkins: I support my hon. Friend the Member for Worthing (Mr. Higgins) and I join forces with the hon. Member for Bodmin (Mr. Bessell), whom I congratulate on the way in which he made his


case. The Chancellor has incorporated an extraordinary provision into the Finance Bill and I find little reason for it.
Referring to Group 4 in the original Purchase Tax Act, 1963, the hon. Member for Bodmin asked for the definition of "mechanical aid" and asked whether articles knitted by hand without mechanical aid would retain their exemption from this extraordinary tax. As I understand it, it is the knitting wool which bears the tax while the article does not. If it is knitted by hand the wool which goes into the article bears purchase tax, but the article does not if it is not made with mechanical aid. That is an extraordinary anomaly.
I cannot help asking myself why the Chancellor is doing this. How much money does he reckon to raise by removing these three exemptions? Will it be a vast sum? As my hon. Friend said, there will be no difference to the G.N.P. and the effect on the balance of payments, miniscule though it may be, will be adverse and certainly not advantageous. Is this intended to be a tax on a particular sector? Is it believed that a sector is "getting away with it", making an absolute bonanza, so much money that the Chancellor must immediately tax it?
In my constituency there is a training college for the disabled where knitting wool is widely used in therapy. The price of that wool will go up. I cannot believe that the Chancellor intended that this type of therapeutic work should bear the tax. The Chancellor must have taken leave of his senses.
When the Financial Secretary gets up I know that he will give a spendid explanation, in the most delightful manner, as he invariably does, and we shall all laugh our heads off. We shall say that there is nothing so bad about it after all, but there is, and the Committee should take note of this. This is a bad principle, attacking by purchase tax, making those who are in great need bear the purchase tax. I am talking about the disabled, those who use this knitting wool for therapeutic purposes.
It is not beyond the ingenuity of the Financial Secretary to find some means, on Report, to exclude such use. Surely the whole of this tax should be scrapped?

The amount of money coming in must be incredibly small. In my constituency there are several factories, if one can call them that, where sewing thread is made. The people there are extremely upset over the imposition of this tax. I find it quite extraordinary that the thread used for the mending of garments should now have to bear tax. Why, what is the purpose of this? Is someone getting away with something?
Why is it that while the Chancellor imposes Purchase Tax on sewing and darning needles he continues to exempt hairpins, hatpins and tiepins? Why is there such a difference here? There must be some splendid reason which we shall undoubtedly hear later. The Financial Secretary must see that the people who will bear the greatest burden are those in the lower income groups the "C's" and "D's". They are the ones who do the home knitting, who have to because of economic circumstances. I am unashamedly speaking for my constituents, and there are plenty of other hon. Members who can say the same. These less well-off people will have to bear this ridiculous imposition. This tax should be laughed out because it is stupid and idiotic. The poor people will have to pay it, and it will be significant for them, even though it may be a few pence or shillings. With the decline in the value of money during the regime of the Chancellor and his predecessor a few shillings today matters, particularly if these people are also unemployed.
What of the young married couples? My hon. Friend the Member for Worthing highlighted the idiocy of the situation whereby if a person knits a garment for a baby the wool in the garment bears purchase tax but if the same garment is bought then that wool does not bear the tax. Why? This is too stupid for words. So far there has been no explanation, either in the Chancellor's speech or in the Budget debate. This cannot raise a vast amount of money, it certainly will not be of any value whatever to our balance of payments.
It may increase them marginally, in that people will say that rather than pay the tax on goods that they make, they will buy garments in the shops. If those garments are imported then the Chancellor is losing. This is another self-defeating measure in conflict with the overall


Budget strategy. How we hear about this Budget strategy! All the time it is brought up as a shibboleth dictating every action. I hope that my hon. Friend's will lend their support to this Amendment, which will help those in the lower income brackets who will be particularly hard hit by this tax. It is ridiculous in its application. Above all the handicapped will suffer.
I can understand that it would be difficult for any Financial Secretary, particularly a Financial Secretary of this Government, to accept an Opposition Amendment, but if the hon. Gentleman cannot do that I suggest that on Report he swallows his pride and abolishes this imposition. It cannot do any good. In fact, it must do harm to a great many people who do not deserve it.

Mr. Michael Shaw: I wish to make two brief points in support of the Amendment.
First, I take up the point about rehabilitation which has been mentioned several times. I well recall towards the end and after the war being in an establishment whose patients required a considerable amount of rehabilitation. I can say from my knowledge how valuable, and indeed indispensable, work such as rug-making, handicraft and sewing was for these people. It is essential. It is a desirable hobby. The advantage is that the work which people do in following it is not only useful but would not be done if it were not done at home during their own time. It is creative work which should be encouraged. Ever since purchase tax began, people have been encouraged to take up this work in their homes and during their spare time.
My second point is this. I have managed to get hold of a copy of the Purchase Tax Act, 1963, from the Library; I hope that nobody else is looking for it. The fourth exemption in Group 2 of Schedule 1 relates to
Articles knitted or crocheted by hand without mechanical aid, including such articles embroidered by hand-needlework.
If someone wants to knit an article, she will have to pay purchase tax on the raw materials, namely, the wool and the needles. I take it that knitting needles are not mechanical aids. I hope that

that point will be cleared up. I assume that if, perhaps because of disability, a person earns a living by knitting garments and selling them, there will be no purchase tax on those articles. I assume that the raw material, namely, the wool, will have to bear purchase tax when the person buys it to make the garment for sale.

Mr. Bessell: Under the arrangements proposed by the Bill, if a disabled person knitted a garment but put it together with a sewing machine it might well be said that a mechanical aid had been used. I wonder whether that point has been considered by the Financial Secretary.

8.45 p.m.

Mr. Shaw: That certainly is another interesting point. The mechanical aid would not be bought particularly for that purpose. It would merely happen to be in the house and could be used for ease of process. It might even be that whilst the person could knit she could not sew and, therefore, another member of the household would use the machine to apply the finishing touch for her.

Mr. Higgins: We are put in great difficulty because we do not have copies of the Purchase Tax Act, 1963. If, however, I understand the position correctly, although purchase tax will be imposed on, for example, knitting yarn, articles which are knitted or crocheted by hand without mechanical aid will still be exempt. I presume—perhaps the Financial Secretary will confirm—that the knitting yarn which is used to make the articles will still be taxed. These matters, however, become extremely complicated when we do not have the Act before us.

Mr. Shaw: By means of my own queries and the valuable additional queries of my hon. Friends, I trust that the various points on this matter will have been clearly made so that the Financial Secretary in due course can elucidate them.
I return, as I began, to the simple proposition that these exemptions, which have stood the test of time over the years, are now called in question not on any great matter of principle, but simply because of the overriding and ever-growing need of a Socialist Government for more money. The Amendment should be supported and the exemptions continued.

[Mr. BRYANT GODMAN IRVINE in the Chair]

Mr. Rafton Pounder: I intervene only briefly, more to ask questions than to seek to make observations or comments. Indeed, there is very little that one can add to the extremely cogent argument presented by my hon. Friend the Member for Worthing (Mr. Higgins). It is no discourtesy to the other and numerous items which are the subject matter of the Amendment if I concentrate my few remarks under two headings only.
The first concerns paper patterns. I seem to recall seeing my wife—and, indeed, my mother—stretched out on the floor with bits of paper in bygone days. Does this purchase tax on paper patterns also cover patterns for children's garments? My reason for asking is that most children's garments are still, mercifully, excluded from purchase tax. It seems slightly crazy to exclude the finished article and yet to place purchase tax on the paper cut-out for the material.
My second point concerns knitting wool. I seem to recall half a dozen principles of taxation, but one in particular relates to equity in taxation. How on earth it can be equitable to tax knitting wool is beyond comprehension. What sort of money does the Financial Secretary hope to raise by taxing knitting wool? Furthermore, what is likely to be the cost of collection? I suggest that the benefit to the Treasury is likely to be marginal.
I should, I suppose, declare an interest in that at home I have a 16-month-old son and I am just beginning to become conscious of the cost of children's clothing. It is obviously infinitely cheaper to knit a sweater or similar garment for a child than to go out and buy one, regardless of the fact that children's made-up garments are not subject to purchase tax. For many people, to go out and buy a sweater or jumper for a child which will be worn for only a few weeks is obviously an extremely expensive business. It is only fair that mothers sitting at home in the evenings should be able to knit garments for their children, and even more so that a mother-to-be should be able to knit for her baby without being penalised for doing so. Baby wool can be used only for one purpose; it cannot be used for knitting an Arran sweater.

If the Financial Secretary finds it difficult to concede the principle of this new tax, surely out of the goodness of his heart he will exempt baby wool.

Mr. John Farr: I support the Amendments which have been so ably put forward by my hon. Friends on this iniquitous new tax. Hon. Members who have spoken from this side of the Committee have made every possible plea, and it may be that it is superfluous for me to add anything, but I feel that the Government should not get away with this. It is scandalous that the Government should put a tax on the initiative of people who are prepared to do a little extra work and knit garments for their families rather than buy them.
The new tax will hit three main categories. First, there are the very old. The next time the Minister visits the old perhaps he will look to see how many are knitting and what they are knitting with. How will they be able to pay the extra amount imposed by the tax? Secondly, the tax will hit the sick. People in hospital do not always wish to read the newspapers; they often prefer to occupy their minds and hands by knitting garments for the family. Thirdly, the tax will hit those people who train their daughters at an early age in the trade of dressmaking. It is a useful way for young girls to learn how to earn a living and by the imposition of this tax the Chancellor will put a stop to such activities.
I hope that the Financial Secretary is big enough to change his mind and to accept the Amendment. The tax will not improve the popularity of the Labour Party, and it will do a great disservice to the old, to the infirm and to the young who will be deprived of garments which might otherwise have been knitted for them.

Mr. James Dance: I shall refer particularly to Amendment No. 100, although I entirely support the Amendments put down by my hon. Friends.
I wish to point out the iniquity of imposing purchase tax on the needle industry for the first time in its history, Redditch, in my constituency, has traditionally been the centre of the needle industry. Money has recently been collected to restore the Forge Mill, which


is an old building of great historic interest in which needles were polished by the use of water power. I do not think the Minister will be surprised to know that when my constituents and the needle industry as a whole realised that this imposition was being put on them they were extremely angry, and the headline in a local newspaper was:
Chancellor's wanton blow to needle industry.
That is true.
The tax does not amount to a great deal. I gather that it amounts to about 2d. on a packet of needles. The amount of income which the Revenue will receive will be pretty small, and people in the industry feel that this is a weak move by the Government, that they are merely saying to the outside world, "We are so hard up that we have to tax needles".
Are surgical needles included in this tax? Apart from the pop groups who may use surgical needles illegally, these needles are used for health purposes, and surely it would be wrong to include them in this tax? Are needles used in manufacturing included? We are not clear whether they are. I do not know whether it is fully appreciated that the needle industry of Great Britain exports about 80 per cent. of its products. I do not suppose that any industry has a higher percentage of exports, most of which go to North America. This is a highly competitive trade, and any extra burden placed on needle manufacturers will certainly not help them in the fine job they are doing for our export trade.
I agree with my hon. Friend the Member for Harborough (Mr. Farr). He referred to the use of wool and materials, but they cannot be made into garments without needles. One cannot sew without needles. Again, as my hon. Friend said, a lot of needlework is done by old people who cannot afford to spend large sums of money on buying new clothes from the shops, and they therefore make their own clothes. Are these the people whom the Socialist Government want to penalise? I do not believe it, but that is what they will do if they carry on with this iniquitous form of taxation.
One cannot conceive that needles are a form of luxury. Admittedly in the past a certain amount of fine needlework was done by ladies of leisure, but few ladies nowadays have that amount of time to

do this needlework, and unfortunately this is a dying art. Needlework and knitting are done chiefly by people who want to save money and to help themselves.
Again as my hon. Friend the Member for Harborough said, some young girls are being encouraged to do needlework in their homes. They may learn a trade and later on get a job because of that knowledge. We keep talking about apprenticeships and helping people to learn a trade. Why tax these young people when they are doing just that?

Mr. Michael Shaw: Does my hon. Friend realise that material of less than six inches does not count for tax? Perhaps with the modern trend of mini skirt they will escape.

Mr. Dance: I read in a newspaper the other day about a lady who was wearing a patchwork dress. If they make patchwork dresses they will not pay tax, but they will still have to pay tax on needles. In fact, they will need more needles to sew these patchwork pieces together.
I sincerely hope that the Government will think again about this wicked, useless, silly form of taxation which will bring in very little revenue. This tax will cause hardship in a minor way. I shall not enlarge on that, or be overdramatic, but I hope that the Government will think again and remove this very stupid and unnecessary form of taxation.

9.0 p.m.

Mr. Joseph Hiley: It is significant, Mr. Godman Irvine, that all the hon. Members who have caught your eye and that of your predecessors in this debate have supported the Amendment. I take a certain pleasure in the thought that even the Minister himself may ultimately support it. My hon. Friend the Member for Worthing (Mr. Higgins) outlined the previous history of purchase tax and referred to previous Purchase Tax Acts. It is reasonable to assume that throughout the period of those Acts—and that period includes the Second World War and the very difficult years that followed—former Chancellors of the Exchequer, including former right hon. Friends of the Minister as well as his right hon. enemies, considered and ultimately rejected the idea of putting purchase tax on knitting wool, rug wool, sewing thread and mending wool. The


arguments which influenced them in the early 1940s are as cogent today.
I must declare a personal interest in the production of knitting and rug wool. I also have a strong constituency interest in those two commodities, because large quantities of both are made in the Pudsey constituency. I hope that hon. Members will not, on that account, consider less sympathetically my plea to exclude these materials from the incidence of purchase tax.
Hon. Members are now listening to one who has spent his life in the production of wools of this kind, and in this instance I may be able to make a contribution of some value, because I shall be talking of something about which I know a good deal—and that rarely happens with speeches made here. I am referring to myself.
The annual production of knitting and rug wool is about 40 million lbs. My hon. Friend the Member for Worthing told us that it is estimated that 60 million garments or rugs will be produced by hand from this 40 million lb. The garments and rugs are made in leisure time, often by old or incapacitated people. It is not generally known that seafaring men also while away many of their less interesting hours in making rugs. All of these things are produced at no cost to the economy. I conclude that the savings made through the production of garments and rugs by hand is equivalent, in terms of wages, power and what generally comes under the heading of overheads to no less than £37 million a year.
No one knows what effect the 13¾ per cent. purchase tax will have, but it would not be unreasonable to assume that it may cause a decline in production of 25 per cent., so the saving of £37 million will fall by about £10 million. People knit and make rugs and garments because they want new garments or new rugs. If, as I estimate, the total falls, garments and rugs will have to be supplied by mechanical means. Some may be made in our hosiery factories or will probably be imported from low-cost countries like Hong Kong, Portugal and Italy. I hope that the fact that children's clothing is exempt will not induce the Chancellor to include it. If all the 15 million garments and rugs were imported, I think that that would raise the import bill by

£10 million. That is not likely, but if half were imported and half made here, where they tend to be of a higher quality and more expensive, the loss to the economy would be greater still.
An increase in what is made at home must mean diversion from exports. Our hosiery factories are fully extended, so the capacity used would mean a decrease in exporting, which I think would cost about £12 million. So the total effect is likely to be that the balance of payments will be worse off by about £25 million a year—and all to secure £5 million in purchase tax. Other hon. Members were not sure of the figure, but I know it because I have tried to persuade the Government of the folly of this proposal already. It is not wise to pursue it now or in any circumstance.
Hand knitting wool and rug wool are used for therapy. They provide many less well-off people with a tremendous amount of pleasure and the satisfaction of knowing that they have produced something with their own hands. At the same time, they make a considerable contribution to the import-export balance.
I understand that the Chancellor's reason for introducing what I can only describe as this amazing proposal is that he is anxious to broaden the tax base. If he will study Early Day Motion No. 317, he will see from the signatures that a great number of hon. Members on both sides of the Committee support the case I am putting. If he succeeds in broadening the tax base in this way, he will merely be attempting to satisfy a doubtful principle, but he will be doing so in nobody's interest.
Last night the Chancellor pointed out that the greatest argument in favour of S.E.T. was its low cost of collection. However, to impose purchase tax on hand knitting and rug wool, not to mention sewing thread and mending wool, will cause hundreds of thousands of small accounts to be sent out by producers, which means that the cost to them of collecting these small sums will make this form of purchase tax the dearest tax imaginable to collect.
Considering the Chancellor's remarks about the need for taxes not to cost too much to collect, I trust that he will consider the imposition of purchase tax on knitting and rug wool in this context.


Need he upset so many people and make his task more difficult? The case for the Amendment, which I have presented on practical grounds, is unanswerable, and I hope that I shall carry the whole Committee with me in getting it accepted.

Mr. Harold Lever: The hon. Member for Pudsey (Mr. Hiley) seemed refreshed by the unanimity of criticism of this tax. He can hardly have been present at many Budget Committee debates if this strikes him as being startlingly different from what is normal.
One of the great consolations of being in Opposition is that one can give full and uninhibited vent to the natural and human feeling that citizens have when faced with the taxpayer whose exactions are to be widened; and particularly when they are to be widened in forms which do not immediately strike one as palatable.
The hon. Gentleman crowned the series of arguments which we have had along the lines of the dire misfortune that will befall the country as the result of this tax by bringing a kind of econometric exactitude to the predictions of doom which might almost qualify him to come into the Treasury. The fact that he will be proved wildly wrong in his predictions need not totally disqualify him from making that journey.

Mr. Hiley: Surely the hon. Gentleman would not suggest that an assumption of a 25 per cent. reduction was excessive?

9.15 p.m.

Mr. Lever: I think that it is not merely excessive but that it is speculative pessimism at its most extended, and will in the event prove to be very much wide of the mark.
Nobody enjoys proposing a new tax. I do not want to quote the innumerable, traditional well-worded epigrams on the subject, including my own, but there is no way of introducing a new tax which will immediately arouse enthusiasm from any hon. Member, least of all myself, and certainly not from hon. Members opposite. The fact remains that when one has regard to the disciplines of fiscal policy, one has sometimes to bring in new taxes not immediately agreeable but for excellent reason.
Hon. Members have tried to play this wrongly in saying that these taxes will bring in trifling sums at each point; that needles will bring in very little; that knitting wool will bring in very little; that paper patterns will bring in very little. But that is the whole point of my right hon. Friend's argument. Most people now believe that we ought to broaden the base of tax, and that we ought to broaden the base of tax so as not to distort by tax patterns the normal human patterns of preference which will express themselves in the expenditure of a normal household budget. It is precisely because these small items bring in very little that they are more agreeable than would be the addition of a still further burden to areas of tax not so immediately susceptible of public appeal, so as to preserve from further distortion the normal patterns of consumption in the country.
So when I put forward the defence of these taxes it is because we are anxious to broaden the bases of tax, not merely to raise the same sums by further impacting on already highly taxed articles. We must act on the assumption that we need the £26 million which, in total, comes from these goods, and if any hon. Member can suggest where we might get the money to replace that—

Mr. Robert Cooke: Would not the Financial Secretary think of a very modest sales tax on practically everything?

Mr. Lever: The hon. Gentleman has given an immediate reply to the challenge. A very modest sales tax on practically everything would be so difficult and so expensive to collect that it would bring into being those hordes of officials that we have heard of—far more than would Purchase Tax on the items.

Mr. Bessell: The Financial Secretary must be aware of the sales tax which exists in New York State. Everything over one dollar is subject to a tax, except food items. It is collected very simply, and the Revenue benefits very directly.

Mr. Lever: I have the hon. Gentleman's assurance that the tax is collected very simply. I can only tell him that these things have all been looked at, and we have found that a general sales tax would


produce hordes, literally hordes of collectors if it were to be universal throughout the country. But if the hon. Member in his examination of the tax system in New York, or even in his reflections on the subject, can offer us suggestions for collecting a general sales tax which would not involve great numbers of officials, I would be very interested to receive his comments.

Mr. Scott-Hopkins: Perhaps I can bring the hon. Gentleman back to his defence of this tax proposal. He mentioned a sum of £26 million. I presume that he was referring to all the textiles, and was not questioning the £5 mllion mentioned by my hon. Friends?

Mr. Lever: No. I was referring to the extension of this section. This money has to be found—

Mr. Cooke: Why did not the Financial Secretary consider the possibility of a system of stamps which could be stuck on a piece of paper in relation to each transaction?

The Temporary Chairman (Mr. Bryant Godman Irvine): Order. The hon. Gentleman must relate his remarks to paragraph 1 of the Schedule.

Mr. Lever: I will merely say, so as to avoid discourtesy, that all the hon. Gentleman's suggestions, even though out of order, will be most rigorously scrutinised by me. Unhappily, the one which has just been urged has come too late to be included in the Bill.
It is not an argument against the tax, but rather in its favour, that it is small in size and in impact. That is exactly the kind of tax that hon. Gentlemen in a different way are urging. I recognise the sincerity with which hon. Members have sought to protect those members of the community who are most hard hit by any tax. The minds of hon. Members have ranged into the possibilities of the Revenue's recovering this loss elsewhere. It is right that hon. Members should have done so.
I am not being in the least unsympathetic when I say that, nevertheless, the aggregation of this presents a distorted picture of how the tax will bite, if taxes bite, or punch, or whatever they do. The impression any stranger from

Lilliput would have gained on coming into the Committee tonight would have been that only the blind and disabled knit and that only people confined to bed with great sickness use domestic linen. Amendment No. 111 asks me to exempt—I am sure that this is a genuine and sincere attempt—
sheets, pillow cases or blankets, used by persons confined to bed by sickness, and upon the certificate of a medical practitioner for a period in excess of two months".
So for sickness lasting seven weeks the person must lie on taxed sheets. When he is in bed for eight weeks or longer, the Chancellor is supposed to inquire into his medical condition and, having ascertained that he has been confined for seven weeks in taxed sheets, grant an exemption from the eight weeks onwards. It would be difficult, because we should have to have a medical certificate.

Mr. Bessell: On a point of order. The Financial Secretary is replying to the next debate.

Mr. Lever: I am sorry. I will keep that pearl for a later occasion. I know that these suggestions are all very sincerely put forward, as I once put forward suggestions in relation to other tax matters. It is always right to test these taxes by their impact upon those who are most hard hit. This is a case of showing the minorities who are most hard hit sympathy by way of social services. I have no doubt that hon. Members will when we deal with increased old age pensions, increased sickness benefits, and increased assistance for disabled persons, share the general wish of the House of Commons that we take into account the cost of living, which includes the tax paid on these matters.
We cannot exempt all knitting wool because same people who knit are blind or are sick, although I have a strong predisposition to exempt knitting wool because some of the most romantic moments of my adolescence were spent winding wool for the mother in order to procure some more cordial reception by the daughter. I have no prejudices against this form of activity, but it would impose an impossible burden if we had to exempt all the hard cases that would be affected by the tax. Blind people use motor cars. Blind people use many other articles that are taxed. Much household equipment is taxed.

Mr. Bruce Campbell: Does the Financial Secretary agree that the only people who need coffins are dead people? The Chancellor by the Budget is putting a tax now on coffin linings.

Mr. Lever: That is one of the least compelling arguments against the tax, on two grounds. I am acutely sensitive to the emotional appeal in relation to those who are most hard hit, but it is rather difficult, even for one whose temperamental reflexes are so much with the taxpayer, to feel quite the same for the fact that the surroundings of corpses have borne a Revenue tax.

Mr. John Cordle: Does not the hon. Gentleman agree that there will be a further element of hardship caused by the removal of the exemptions, bcause by the time the knitting wool or rug wool comes on the counter and the customer pays for it it will be paid for not at an increase of 13 per cent. or thereabouts for purchase tax but probably at 20 or 25 per cent., because the retailer has the right to add his profit to the purchase tax before the article reaches the customer?

Mr. Lever: I am glad to say that the hon. Gentleman is wrong there. The tax on 2s. 6d. worth of wool will work out at about 3d., that is, an increase of about 10 per cent. The hon. Gentleman can be gratified to think that the tax which he will impose can be imposed with a little less enthusiasm because it will be something less than half of what he expected to hand on to the customer.
The right reaction in respect of disabled people and blind people in relation to these taxes is to take into account the cost of living, which includes such taxes, when we fix the assistance to them. Any other way would, of course, destroy all indirect taxation. Blind people are known to eat ice cream. Disabled people and children eat ice cream and enjoy it, but it is taxed. Those who are likely to be badly affected ought to be taken care of by the social services.
I do not accept the argument that we shall add to the import bill because people will stop knitting and take to buying imported children's garments or have them made on machines in England which would otherwise be used for exports. This modest tax will have a

negligible effect on people's knitting habits. It will make a modest contribution to the revenue by broadening the base of the tax, and that is its object. I absolutely reject the view that people will significantly diminish so compulsive an occupation as knitting or dressmaking on account of the trifling sums involved for needles, thread and the like.

Mr. Dance: Are surgical needles exempt?

Mr. Lever: Having dealt with the question generally, I am just coming to some of the detailed points.
First, I take the case of the blind knitter who uses a mechanical device to knit garments. I assume that he is not commercially engaged in knitting, in which case he would not be affected. The wool would be taxed, whether the blind knitter used machinery or not, and, if he was not engaged in business in a commercial way, he would not be affected. The exemption to which reference was made refers to commercial knitting in another context. He would not be involved in tax on the garments themselves. No garment is taxed which is not made in the ordinary course of commerce.
The purpose of the exemption—this is related only indirectly to the Amendment—is to allow people who do hand knitting in the croft industry to be exempt from tax not on the wool but on the garments produced by their hand knitting, a totally different point. There will be no difficulty in establishing this relief, which has been wisely operated for a long time.
I was asked by the hon. Member for Bodmin (Mr. Bessell) whether a pattern given away with a newspaper or magazine would bear tax. Yes, it would, but we should collect the tax not from the shop or the man or woman who bought the magazine but from the manufacturer or through the wholesaler. Patterns of the kind given away in such circumstances are so trifling that the tax on them would, presumably, be a fraction of a penny. On the more complex patterns which people use, I think that the tax could come to as much as 6d. for a dress—not a very serious item and not likely to deter any of the more determined domestic dressmakers at that sort of level.
Surgical needles are exempt. We are proud of our needle industry and its export record, and I am confident that the 20 per cent. domestic production will not be significantly affected. The hon. Member for Bromsgrove (Mr. Dance) has a firm interest in this, and I hope that he will be in a position to give me warning if he finds any serious decline even in that fraction of the needle industry which goes to domestic production.

9.30 p.m.

Mr. Dance: I accept that, and I will.

Mr. Lever: I hardly think that dire effects on domestic production will arise, however.
For all these reasons, I commend this extension of the tax. It is not because we like taxing people but where so many people have to be taxed it is better to spread the burden wisely and try to get more light taxes and fewer heavy taxes, which distort the natural pattern of consumption. That is my right hon. Friend's aim. I endorse it and commend it to the Committee.

Mr. Higgins: I was inclined to say that the reply of the Financial Secretary was the worst I had heard on an emotional Amendment of this kind, but that would not be true since it is only as bad as anything that one has heard from the Government. It became clear that the

hon. Gentleman was using his all-purpose speech for the rejection of any Amendments dealing with this kind of tax. That speech applies more to the next Amendment than to this one.

Mr. Harold Lever: The argument in respect of the next Amendment to be considered is equally vivid on this one in relation to the claim made in almost every speech that this tax will affect the blind, the disabled or the sick. The hon. Gentleman may have preferred me to have used the argument on the next Amendment but I did not think that I should defer it from this one.

Mr. Higgins: The hon. Gentleman has made out no case. We are concerned with the disabled, the blind and the sick. We are concerned because these products, particularly knitting wool, are important in the context of these disabilities. Many of these people use knitting wool as a means of relaxation or rehabilitation, and there is also the second group, consisting of those with relatively low incomes and who knit in order to offset them. The best thing we can do is divide the Committee as a protest against that inadequate reply. I hope that the Committee will carry the Amendment.

Question put, That the Amendment be made:—

Committee divided: Ayes 210, Noes 269.

Division No. 228.]
AYES
[9.34 p.m.


Alison, Michael (Barkston Ash)
Bullus, Sir Eric
Eyre, Reginald


Allason, James (Hemel Hempstead)
Burden, F. A.
Farr, John


Amery, Rt. Hn. Julian
Campbell, B. (Oldham, W.)
Fortescue, Tim


Astor, John
Campbell, Gordon (Moray &amp; Nairn)
Foster, Sir John


Awdry, Daniel
Channon, H. P. G.
Galbraith, Hn. T. G.


Baker, Kenneth (Acton)
Clegg, Walter
Gilmour, Ian (Norfolk, C.)


Baker, W. H. K. (Banff)
Cooke, Robert
Glover, Sir Douglas


Balniel, Lord
Cordle, John
Glyn, Sir Richard


Barber, Rt. Hn. Anthony
Corfield, F. V.
Goodhart, Philip


Batsford, Brian
Costain, A. P.
Goodhew, Victor


Beamish, Col. Sir Tufton
Craddock, Sir Beresford (Spelthorne)
Gower, Raymond


Bell, Ronald
Crouch, David
Grant-Ferris, R.


Bennett, Dr. Reginald (Gos. &amp; Fhm)
Crowder, F. P.
Gresham Cooke, R.


Berry, Hn. Anthony
Cunningham, Sir Knox
Grieve, Percy


Bessell, Peter
Dalkeith, Earl of
Grimond, Rt. Hn. J.


Biffen, John
Dance, James
Gurden, Harold


Biggs-Davison, John
d'Avigdor-Goldsmid, Sir Henry
Hall, John (Wycombe)


Birch, Rt. Hn. Nigel
Dean, Paul
Hall-Davis, A. C. F.


Blaker, Peter
Deedes, Rt. Hn. W. F. (Ashford)
Hamilton, Lord (Fermanagh)


Boardman, Tom (Leicester, S. W.)
Digby, Simon Wingfield
Hamilton, Michael (Salisbury)


Body, Richard
Dodds-Parker, Douglas
Harrison, Brian (Maldon)


Boyle, Rt. Hn. Sir Edward
Doughty, Charles
Harrison, Col. Sir Harwood (Eye)


Braine, Bernard
Drayson, G. B.
Harvey, Sir Arthur Vere


Brewis, John
du Cann, Rt. Hn. Edward
Harvie, Anderson, Miss


Brinton, Sir Tatton
Eden, Sir John
Hastings, Stephen


Bromley-Davenport, Lt.-Col. Sir Walter
Elliot, Capt. Walter (Carshalton)
Hawkins, Paul


Brown, Sir Edward (Bath)
Elliott, R. W. (N'c'tle-upon-Tyne, N.)
Hay, John


Bruce-Gardyne, J.
Emery, Peter
Heseltine, Michael


Buchanan-Smith, Alick (Angus, N &amp; M)
Errington, Sir Eric
Higgins, Terence L.


Buck, Antony (Colchester)
Ewing, Mrs. Winifred
Hiley, Joseph




Hill, J. E. B.
Maydon, Lt.-Cmdr. S. L. C.
Scott, Nicholas


Hogg, Rt. Hn. Quintin
Mills, Peter (Torrington)
Scott-Hopkins, James


Holland, Philip
Mills, Stratton (Belfast, N.)
Sharples, Richard


Hordern, Peter
Miscampbell, Norman
Shaw, Michael (Sc'b'gh &amp; Whitby)


Hunt, John
Mitchell, David (Basingstoke)
Silvester, Frederick


Hutchison, Michael Clark
Monro, Hector
Sinclair, Sir George


Iremonger, T. L.
More, Jasper
Smith, Dudley (W'wick &amp; L'mington)


Jenkin, Patrick (Woodford)
Morgan-Giles, Rear-Adm.
Smith, John (London &amp; W'minster)


Johnson Smith, C. (E. Grinstead)
Morrison, Charles (Devizes)
Speed, Keith


Jones, Arthur (Northants, S.)
Munro-Lucas-Tooth, Sir Hugh
Stainton, Keith


Jopling, Michael
Murton, Oscar
Steel, David (Roxburgh)


Kaberry, Sir Donald
Nabarro, Sir Gerald
Stodart, Anthony


Kerby, Capt. Henry
Neave, Alrey
Stoddart-Scott, Col. Sir M.


Kershaw, Anthony
Noble, Rt. Hn. Michael
Summers, Sir Spencer


King, Evelyn (Dorset, S.)
Nott, John
Tapsell, Peter


Kirk, Peter
Onslow, Cranley
Taylor, Sir Charles (Eastbourne)


Kitson, Timothy
Orr, Capt. L. P. S.
Taylor, Edward M. (G'gow, Cathcart)


Knight, Mrs. Jill
Osborn, John (Hallam)
Taylor, Frank (Moss Side)


Lancaster, Col. C. G.
Osborne, Sir Cyril (Louth)
Temple, John M.




Thatcher, Mrs. Margaret


Lane, David
Page, Graham (Crosby)
Turton, Rt. Hn. R. H.


Legge-Bourke, Sir Harry
Peel, John
Vaughan-Morgan, Rt. Hn. Sir John


Lewis, Kenneth (Rutland)
Percival, Ian
Vickers, Dame Joan


Lloyd, Rt. Hn. Geoffrey (Sut'n C'dfield)
Peyton, John
Waddington, David


Lloyd, Ian (P'tsm'th, Langstone)
Pink, A. Bonner
Walker, Peter (Worcester)


Lloyd, Rt. Hn. Selwyn (Wirral)
Pounder, Rafton
Wall, Patrick


Longden, Gilbert
Price, David (Eastleigh)
Walters, Dennis


Lubbock, Eric
Prior, J. M. L.
Ward, Dame Irene


MacArthur, Ian
Pym, Francis
Wells, John (Maidstone)


Maclean, Sir Fitzroy
Quennell, Miss J. M.
Whitelaw, Rt. Hn. William


Macleod, Rt. Hn. Iain
Ramsden, Rt. Hn. James
Wiggin, A. W.


McMaster, Stanley
Rawlinson, Rt. Hn. Sir Peter
Williams, Donald (Dudley)


Macmillan, Maurice (Farnham)
Rees-Davies, W. R.
Wilson, Geoffrey (Truro)


McNair-Wilson, Michael
Renton, Rt. Hn. Sir David
Wood, Rt. Hn. Richard


McNair-Wilson, Patrick (New Forest)
Rhys Williams, Sir Brandon
Woodnutt, Mark


Maddan, Martin
Ridsdale, Julian
Worsley, Marcus


Maginnis, John E.
Rodgers, Sir John (Sevenoaks)
Wright, Esmond


Marples, Rt. Hn. Ernest
Rossi, Hugh (Hornsey)
Younger, Hn. George


Marten, Neil
Royle, Anthony



Maude, Angus
Russell, Sir Ronald
TELLERS FOR THE AYES:


Mawby, Ray
St. John-Stevas, Norman
Mr. Bernard Weatherill and


Maxwell-Hyslop, R. J.
Sandys, Rt. Hn. D.
Mr. Humphrey Atkins.




NOES


Albu, Austen
Chapman, Donald
Fletcher, Raymond (Ilkeston)


Allaun, Frank (Salford, E.)
Coe, Denis
Fletcher, Ted (Darlington)


Alldritt, Walter
Coleman, Donald
Foley, Maurice


Anderson, Donald
Corbet, Mrs. Freda
Foot, Rt. Hn. Sir Dingle (Ipswich)


Archer, Peter
Crawshaw, Richard
Foot, Michael (Ebbw Vale)


Ashley, Jack
Crosland, Rt. Hn. Anthony
Ford, Ben


Ashton, Joe (Bassetlaw)
Darting, Rt. Hn. George
Forrester, John


Atkins, Ronald (Preston, N.)
Davidson, Arthur (Accrington)
Fowler, Gerry


Atkinson, Norman (Tottenham)
Davies, G. Elfed (Rhondda, E.)
Fraser, John (Norwood)


Bacon, Rt. Hn. Alice
Davies, Dr. Ernest (Stretford)
Freeson, Reginald


Bagier, Gordon A. T.
Davies, Rt. Hn. Harold (Leek)
Galpern, Sir Myer


Barnett, Joel
Davies, Ifor (Gower)
Gardner, Tony


Beaney, Alan
de Freitas, Rt. Hn. Sir Geoffrey
Garrett, W. E.


Bence, Cyril
Dell, Edmund
Gordon Walker, Rt. Hn. P. C.


Benn, Rt. Hn. Anthony Wedgwood
Dempsey, James
Gray, Dr. Hugh (Yarmouth)


Bidwell, Sydney
Diamond, Rt Hn. John
Gregory, Arnold


Binns, John
Dickens, James
Grey, Charles (Durham)


Bishop, E. S.
Dobson, Ray
Griffiths, David (Rother Valley)


Blackburn, F.
Doig, Peter
Griffiths, Eddie (Brightside)


Blenkinsop, Arthur
Dunn, James A.
Griffiths, Rt. Hn. James (Llanelly)


Booth, Albert
Dunnett, Jack
Griffiths, Will (Exchange)


Boston, Terence
Dunwoody, Mrs. Gwyneth (Exeter)
Hamilton, James (Bothwell)


Bottomley, Rt. Hn. Arthur
Dunwoody, Dr. John (F'th &amp; C'b'e)
Hamilton, William (Fife, W.)



Eadie, Alex
Hannan, William


Boyden, James
Edelman, Maurice
Harrison, Walter (wakefield)


Bradley, Tom
Edwards, Robert (Bilston)
Hattersley, Roy


Bray, Dr. Jeremy
Edwards, William (Merioneth)
Hazell, Bert


Brooks, Edwin
Ellis, John
Healey, Rt. Hn. Denis


Brown, Rt. Hn. George (Belper)
English, Michael
Heffer, Eric S.


Brown, Hugh D. (G'gow, Provan)
Ennals, David
Herbison, Rt. Hn. Margaret


Brown, Bob (N'c'tle-upon-Tyne, W.)
Ensor, David
Hilton, W. S.


Brown, R. W. (Shoreditch &amp; F'bury)
Evans, Fred (Caerphilly)
Hobden, Dennis


Buchan, Norman
Evans, Ioan L. (Birm'h'm, Yardley)
Hooley, Frank


Buchanan, Richard (G'gow, Sp'burn)
Faulds, Andrew
Houghton, Rt. Hn. Douglas


Butler, Herbert (Hackney, C.)
Fernyhough, E.
Howarth, Robert (Bolton, E.)


Callaghan, Rt. Hn. James
Finch, Harold
Howell, Denis (Small Heath)


Cant, R. B.
Fitch, Alan (Wigan)
Howie, W.


Carmichael, Neil
Fitt, Gerard (Belfast, W.)
Hoy, James


Castle, Rt. Hn, Barbara
Fletcher, Rt. Hn. Sir Eric (Islington, E.)
Huckfield, Leslie







Hughes, Rt. Hn. Cledwyn (Anglesey)
Marsh, Rt. Hn. Richard
Roebuck, Roy


Hughes, Hector (Aberdeen, N.)
Mason, Rt. Hn. Roy
Rogers, George (Kensington, N.)


Hughes, Roy (Newport)
Maxwell, Robert
Rowlands, E.


Hunter, Adam
Mellish, Rt. Hn. Robert
Ryan, John


Hynd, John
Mendelson, John
Shaw, Arnold (Ilford, S.)


Janner, Sir Barnett
Mikardo, Ian
Sheldon, Robert


Jay, Rt. Hn. Douglas
Millan, Bruce
Shinwell, Rt. Hn. E.


Jeger, George (Goole)
Milne, Edward (Blyth)
Shore, Rt. Hn. Peter (Stepney)


Jenkins, Hugh (Putney)
Molloy, William
Short, Mrs. Renée (W'hampton, N. E.)


Jenkins, Rt. Hn. Roy (Stechford)
Morgan, Elystan (Cardiganshire)
Silkin, Rt. Hn. John (Deptford)


Johnson, Carol (Lewisham, S.)
Morris, Charles R. (Openshaw)
Silkin, Hn. S. C. (Dulwich)


Johnson, James (K'ston-on-Hull, W.)
Morris, John (Aberavon)
Silverman, Julius


Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)
Moyle, Roland
Skeffington, Arthur


Jones, J. Idwal (Wrexham)
Mulley, Rt. Hn. Frederick
Slater, Joseph


Jones, T. Alec (Rhondda, West)
Murray, Albert
Small, William


Kelley, Richard
Neal, Harold
Spriggs, Leslie


Kerr, Russell (Feltham)
Newens, Stan
Steele, Thomas (Dunbartonshire, W.)


Lawson, George
Noel-Baker, Rt. Hn. Philip
Strauss, Rt. Hn. G. R.


Leadbitter, Ted
Oakes, Gordon
Summerskill, Hn. Dr. Shirley


Lee, Rt. Hn. Frederick (Newton)
Ogden, Eric
Swain, Thomas


Lee, John (Reading)
Oram, Albert E.
Taverne, Dick


Lestor, Miss Joan
Orbach, Maurice
Thomas, Rt. Hn. George


Lever, Harold (Cheetham)
Orme, Stanley
Thomson, Rt. Hn. George


Lever, L. M. (Ardwick)
Oswald, Thomas
Tinn, James


Lewis, Arthur (W. Ham, N.)
Owen, Dr. David (Plymouth, S'tn)
Tomney, Frank


Lewis, Ron (Carlisle)
Owen, Will (Morpeth)
Tuck, Raphael


Lipton, Marcus
Padley, Walter
Urwin, T. W.


Lomas, Kenneth
Page, Derek (King's Lynn)
Varley, Eric G.


Loughlin, Charles
Paget, R. T.
Wainwright, Edwin (Dearne Valley)


Luard, Evan
Pannell, Rt. Hn. Charles
Walker, Harold (Doncaster)


Lyon, Alexander W. (York)
Parker, John (Dagenham)
Wallace, George


Lyons, Edward (Bradford, E.)
Parkin, Ben (Paddington, N.)
Watkins, David (Consett)


Mabon, Dr. J. Dickson
Parkyn, Brian (Bedford)
Watkins, Tudor (Brecon &amp; Radnor)


McBride, Neil
Pavitt, Laurence
Wellbeloved, James


McCann, John
Pearson, Arthur (Pontypridd)
White, Mrs. Eirene


MacColl, James
Peart, Rt. Hn. Fred
Whitlock, William


Macdonald, A. H.
Pentland, Norman
Wilkins, W. A.


McGuire, Michael
Perry, Ernest G. (Battersea, S.)
Willey, Rt. Hn. Frederick


McKay, Mrs. Margaret
Perry, George H. (Nottingham, S.)
Wiliams, Alan (Swansea, W.)




Williams, Alan Lee (Hornchurch)


Mackenzie, Gregor (Rutherglen)
Prentice, Rt. Hn. R. E.
Williams, Clifford (Abertillery)


Mackie, John
Price, Thomas (Westhoughton)
Williams, Mrs. Shirley (Hitchin)


Mackintosh, John P.
Price, William (Rugby)
Williams, W. T. (Warrington)


Maclennan, Robert
Probert, Arthur
Willis, Rt. Hn. George


McMillan, Tom (Glasgow, C.)
Rankin, John
Wilson, Rt. Hn. Harold (Huyton)


McNamara, J. Kevin
Rees, Merlyn
Wilson, William (Coventry, S.)


MacPherson, Malcolm
Rhodes, Geoffrey
Winnick, David


Mallalieu, E. L. (Brigg)
Roberts, Albert (Normanton)
Woof, Robert


Mallalieu, J. P. W. (Huddersfield, E.)
Roberts, Rt. Hn. Goronwy
Wyatt, Woodrow


Manuel, Archie
Roberts, Gwilym (Bedfordshire, S.)



Mapp, Charles
Robertson, John (Paisley)
TELLERS FOR THE NOES:


Marks, Kenneth
Robinson, Rt. Hn. Kenneth (St. P'c'as)
Mr. Joseph Harper and


Marquand, David
Rodgers, William (Stockton)
Dr. M. S. Miller.

9.45 p.m.

Mr. Higgins: I beg to move Amendment No. 45, in page 74, line 25, leave out paragraph 3.

The Temporary Chairman (Mr. Bryant Godman Irvine): It will be convenient to take at the same time Amendment No. 66, page 74, line 27, after 'textile', insert 'other than jute'.
Amendment No. 46, page 74, line 29, at end insert:
'except for linen which will continue to be exempt'.
Amendment No. 68, page 74, line 29, at end insert:
'and after the word "Exempt" there shall be added the words "pram quilts, pram blankets, pram sheets, pram pillow cases, cot blankets, cot quilts, cot sheets, cot pillow cases, baby face cloths, pram and cot rubber sheets"'.

Amendment No. 111, page 74, line 29, at end insert:
'except sheets, pillow cases or blankets, used by persons confined to bed by sickness, and upon the certificate of a medical practitioner, for a period in excess of two months'.
Amendment No. 112, page 74, line 29, at end insert:
'except sheets, pillow cases or blankets used by hospitals, nursing homes or similar institutions'.
Amendment No. 113, page 74, line 29, at end insert:
'except sheets, pillow cases or blankets used by boarding schools, youth hostels or similar institutions'.
Amendment No. 114, page 74, line 29, at end insert:
'except sheets, pillow cases or blankets supplied for use in hotels and boarding houses'.


Amendment No. 115, page 74, line 29, at end insert:
'except towels and soft furnishings supplied for use in hospitals, nursing homes or similar institutions'.
Amendment No. 116, page 74, line 29, at end insert:
'except towels and soft furnishings supplied for use in boarding schools, youth hostels or similar institutions'.
Amendment No. 117, page 74, line 29, at end insert:
'except towels and soft furnishings supplied for use in hotels and boarding houses'.

Mr. Higgins: In view of the shortage of copies of the Purchase Tax Act, 1963, it may be helpful if I spell out the significance of the Amendment. Paragraph 3 of Schedule 6 of the Bill reads:
In Group 6, for so much of that Group as precedes the word 'Exempt' there shall be substituted the following:—
'Articles of textile, plastic, paper or similar material of a kind used for soft furnishings, bedding or other domestic purposes.'
If one refers to the 1963 Act, it becomes apparent that the Government are proposing to bring into purchase tax a whole range of household textiles, particularly those used for bedding, such as sheets and blankets. We believe that this is a retrograde step because it effectively restores the position which existed prior to 1955–56, when the Conservative Administration took these items outside the scope of purchase tax. It is surely extraordinary, at a time when the Committee is presented with the textile report, there should apparently be no co-ordination between Government Departments on this matter and the Government propose to increase the tax borne by these items.
On the last Amendment, I had occasion to say to the Financial Secretary that I was a little uncertain about the Amendment to which his remarks referred. He pointed out that they were equally applicable to either Amendment. We are in some difficulty on this Amendment because the scope of the Schedule is far from clear. A number of us on this side of the Committee have received representations which suggest that it goes a great deal wider than was originally expected and possibly wider than the Government intend. I therefore hope

that the Financial Secretary will be able to clarify a number of points which I should like to put to him.
Paragraph 3 of Schedule 6 refers to
'Articles of textile … of a kind used for … domestic purposes.'
But I understand that in the purchase tax notices which have been sent to the trade there is considerable doubt about the exact meaning of these phrases. A number of items which are used for industrial purposes—in other words, industrial cloths—may fall within the scope of the Schedule. I hope that the Financial Secretary will be able to clear up the matter beyond doubt. What is the position regarding cotton filter cloth? Is this caught by the Schedule? What about laundry pressed calico or milk filter cloth? Are these to be brought within the scope of purchase tax again? What is the position concerning many industrial cloths which are used in the production of items which go into exports or commodities used on the home market?
Secondly, I should like the Financial Secretary to clarify the position concerning items which go into a further stage of production. This part of the Schedule bristles with anomalies. We have received a letter from a firm of great repute which points out that tarpaulins, which are exempt from tax, may continue not to be taxed but that the fabrics used in the tarpaulins will be charged to purchase tax if the customer using the product is not registered. Is that the intention of the Government? Do they intend to impose this tax, through this part of the Schedule, on items which will then be used to make up items which will not be taxed? If that is so, how do the Government propose to deal with this difficulty?
The second point on which there is considerable difficulty again arises from the purchase tax notices issued by the Government, but of which there has been no mention in the House, because it appears that a number of items—for example, textiles used for making garments or curtains—come within the same category as those used for bookbinding materials. We therefore need the Financial Secretary to make it clear whether textiles which are used as bookbinding materials will be caught within the provisions of the Schedule. There is great ambiguity about the whole matter.
The third point which needs to be cleared up relates to the question of stocks. If I understand the question correctly, the retailer who has held a large amount of stock of a certain textile has never since 1955 paid purchase tax on it. Many retailers hold large stocks and, on the whole, this has enabled them to charge lower prices to their customers, because of the effects of inflation, than would otherwise have been the case.
What will be the position concerning purchase tax, first, if those retailers sell the piece of textile cloth in question to a customer, who then returns it to them and asks them to make it up into an article, and, secondly, if they make up the article and sell it direct to the customer? It appears that in the case of existing stocks there will be a clear anomaly which would entail a number of customers going through the farcical process of having to buy the cloth and hand it back to the retailer for making up to avoid the tax whereas if they got it made up straight away, it would be taxed.
Would it not be a great deal more simple and sensible if the Government exempted from charge all those stocks which are already held by retailers, the vast majority of whom are not at present registered for purchase tax, whether the stock in question was sold as a raw material, as a textile, or as a finished product—say, a set of curtains? I hope that the Financial Secretary can clarify this for us.
A further matter on which we have received representation concerns the apparent discrimination between various producers of household textiles. It would appear that some producers operate on a very large scale, others operate on a moderate scale and yet a third set operate on a very small scale. The extraordinary thing with this distinction is that if there is a single large purchaser from these groups, I understand that the Inland Revenue, to maintain equilibrium between the three groups, will upgrade the wholesale price charged by the large firm when sold by a large customer compared with the alternative suppliers. As a result of the imposition of this tax, the effect will be to put the large, efficient, high-quality producer at a disadvantage compared with his smaller or less efficient

competitor who is, perhaps, producing goods of lower quality.
Is that the case under the Schedule? I understand it to be so. I presume that the Treasury, like ourselves, has received representations. If so, what does the the Financial Secretary propose to do about it at this stage? It is a matter of considerable urgency because this tax is about to be levied in a few days' time.
It would be right and proper that we should have explanations from the Financial Secretary on these technical points. On the overall point, however, our con tention is that the Government are bringing into purchase tax a number of items which are clearly of an essential nature and on which purchase tax has not been imposed since we exempted them back in 1955–56.
The impact on the cost of living is likely to be considerable. For example, the price of a pair of sheets costing £3 10s. may well increase to about £4, and the price of blankets and towels is likely to rise considerably. On all these items the Government are taking discriminatory action against essentials which in turn discriminates against those with the lowest incomes. The wording of the Clause is extremely ambiguous.
The Government's proposals, we think, are wrong on the basis I have described and, unless the Financial Secretary gives a better answer than the one he gave on the previous Amendment, I hope that my right hon. and hon. Friends will support the Amendment in the Division Lobby.

Mr. Bruce-Gardyne: I rise to support my hon. Friend on the general case he has made on the main Amendment. I want to address my remarks more specifically to Amendment No. 66. I hope that it is correctly drafted, but I find the Clause more than a little difficult to follow, and this has been aggravated by the difficulty of obtaining access to the text of the original Act. The purpose of the Amendment is to make a special exemption within the general class for wall coverings of hessian and jute.
My experience bears out what my hon. Friend has said on the confusion which exists about the changes. Firms in my constituency have been entirely unable to discover what are the repercussions of the changes on the textile industry in


Scotland. They sent a special representative to London to try to ascertain the exact circumstances, but even then they could obtain no clear and specific answer.
There is one point on which the experience of local firms in my area is opposite to the experience described by my hon. Friend. He referred to large suppliers dealing in bulk being apparently disadvantageously treated. The experience of some firms in my constituency is that they will not be allowed to charge purchase tax, if they have to pay it, on the retail price to the wholesaler less the discount. Their experience is precisely the opposite to the experience described by my hon. Friend. This is an example of the confusion which has arisen.
My main point is twofold in defence of what is admittedly a special and localised interest. It can be argued that there is no reason why jute and hessian wall coverings should be exempted from purchase tax when other forms of textile or paper wall coverings are not exempted. There are two reasons which I advance in support of my Amendment. First, as I understand it, these hessian wall coverings come very high in the price range of alternative wallpapers available to the customer, and as a result the incidence of the tax which is to be imposed on them under this Clause if it is not amended will be much more severe on the end price—not as a percentage, but in terms of the end price.
10.0 p.m.
I did not press that argument too far, because my main argument is that over the years successive Governments have tried to encourage the jute industry in Scotland to diversify its production towards a more sophisticated end of the product range to insulate itself against the effect of low cost competition from India and Pakistan as tariffs and other forms of protection have come down under the Government's encouragement and indeed direction. Some of the firms in Scotland have made a tremendous effort and have achieved great success in doing precisely that, but this has represented a considerable problem, particularly for some of the smaller firms in some of the burghs in my constituency.
One of the products into which they have diversified, and done so most successfully in recent years, is hessian wall cover-

ings. I am told that in some of the smaller firms in my constituency hessian wall coverings represent upwards of 10 per cent. of total output, and that this proportion is rising rapidly. They feel that having been urged and begged by successive Governments to go into this sort of production, they now find themselves suddenly attacked with this imposition of purchase tax which will have a serious effect on what is becoming an increasingly important market to them.
When one bears in mind that in the burghs in which these firms are functioning anything up to 60 per cent. of the total employment in the burgh is provided by one or two jute firms, Ministers can see the seriousness of the position which could arise if this tax has a serious effect on their ability to develop what has become a most successful market.
I hope that when the Financial Secretary replies he will offer some word of help and encouragement, and perhaps even a word of release, to those firms which are urgently seeking and appealing for what is a not unreasonable narrow measure of relaxation in this respect.

Mr. Charles Mapp: We have listened to two speeches on this subject. The first contribution did consider the major principle, but rather concentrated on detail. The second was related to the jute industry. As I recall it, that industry has a measure of control which the cotton textile industry would gladly have, but does not. The jute industry is in a legislative position which I gather would never be granted to any other industry in this country. I am not complaining about that. Having tried once or twice to get that form of import and other control for cotton textiles but not having succeeded, I should be sour indeed if I were to try to rob Dundee and other places of the advantages they enjoy.
I am more than glad that the Chancellor of the Exchequer is here, because I want to look at some words which he used on Budget day and tell him why I abstained on that occasion from supporting his proposals, and why, unless I hear something better, I shall probably do the same this evening. The Chancellor said:
Paradoxically, paper handkerchiefs are not taxed but linen and cotton ones are.


He then put the point more generally and said:
I do not think that the distinction between floor coverings, mattresses, cushions, furniture and clothing—which are taxed—and household textiles and cloth—which are not taxed—is a valid one."—[OFFICIAL REPORT, 15th April, 1969; Vol. 781, c. 1023.]
My right hon. Friend prefaced this statement by agreeing with what the Opposition speaker had said about the history of the matter, namely, that in 1955 or thereabouts and in 1957 the then Government, for reasons that we all remember, took off purchase tax. In those days the industry was employing about 250,000 people. It is now employing about 100,000. In the last 15 years in my town—which is fairly typical of Lancashire—15,000 jobs have disappeared, together with half the mills. The Chancellor said that in order to tidy up an untidy position in his administrative machine he has decided that the industry will bear in a full year most of £30 million in additional taxation. He acknowledged what had been said about the history of purchase tax and its having been lifted, but he added that a good deal of the commodity was imported. We know that. The point is that both imported and home-made textiles are subject to purchase tax. That might have been a casual slip on his part. If it was a deliberate statement, however, it has no validity.
I take the view that the cotton textile industry is keeping too many of its troubles to itself. During the last seven or eight years it has undergone a major transformation such as no other industry has known. Hon. Members on both sides of the Committee have tried to ensure that the industry has some solidity, and some future. I do not want to be too controversial, but in my opinion the recent efficiency study which has been carried out has been more forthcoming than any previous study of the industry.
I know the industry reasonably well, and I was very pleased to see that it has begun to look outwards instead of inwards. It should do more in this direction. It now has a leadership, which it had patently lacked for some time. The report is now before the Government and the President of the Board of Trade is giving it his deep consideration. I hope that hon. Members on both sides of the

Committee are also considering it. The industry has gone through some violent storms. Possibly it has gone through its last one, although I should not like to be too sure about that.
The industry is down on its uppers. In my town, which was a typical cotton town, during a short period of years more than 12,000 out of 20,000 left the industry. At this moment the Chancellor of the Exchequer, presumably adopting a Whitehall point of view, has decided that in order to straighten out the administrative pattern—and, at the same time, to collect most of £30 million—he will inflict upon the industry a burden of this kind, whether 40 per cent. of our textiles are imported or not, because both imported and home-produced textiles bear precisely the same Purchase Tax across the counter.
I appeal to the Chancellor to reconsider his decision. No hon. Member will object personally to paying purchase tax in respect of the textile furnishings for his or her home, but every hon. Member will know that in his constituency there are many homes where the mothers have two or three children, or perhaps more, and where the income is very limited. This tax will hurt such women. Their requirements in bed linen and personal linen are wholly different to those of the rest of us. They will bear the brunt of this tax. I can see how nice and straightforward the administrative argument might have looked in Whitehall, but I hope that some humanity will be shown.
My right hon. Friend may not have seen the dissolution of the textile industry across Lancashire and parts of Yorkshire. We have partly got over these drawbacks. I want to hear some soothing words or I cannot support the Government. It is a little late to expect my right hon. Friend to say them tonight, but perhaps he can say that he will look at this again or that this is not the Government's final policy towards the textile industry. If I abstain alone tonight, I will know that 40 or 50 Labour Members from Lancashire and Cheshire broadly agree with me. I beg my right hon. Friend to consider the feelings of this vast number who are mainly loyal to the Government. I may be a notorious cotton man, but I am always proud to state this case. I have 40,000 voters in my constituency, which may be a vested interest.
The Chancellor should think again about this unfortunate blow at an industry which has just come out of 10 or 15 years of blow upon blow. The waves are now a little smoother and with courage and Government support the future could be brighter, yet now he imposes this new blow. Whatever the decision in the Lobbies, I beg him to consider this urgently. The county, the industry and, above all, the woman with a young family deserve this consideration.

[Mr. HARRY GOURLAY in the Chair]

Mr. Bessell: The hon. Member for South Angus (Mr. Bruce-Gardyne) expressed the fears of many of us who have drafted Amendments to this part of the Bill. As he said, it has been difficult to obtain a copy of the parent Act of 1963, upon which the Schedule depends. Ten days ago, I applied to the Stationery Office for a copy, and was told that it was impossible to get one. Had it not been for the assistance of the Library, whose staff generously duplicated the essential pages for me, I and my hon. Friends could not have drafted the Amendments.
This matter cannot be emphasised enough. It is wrong that hon. Members should be inconvenienced—even more so if some Amendments are not worded correctly simply because we cannot give the relevant Act the normal study which we would wish. I support everything that was said by the hon. Member for Worthing (Mr. Higgins) in moving what I regard as an extremely important Amendment.

10.15 p.m.

Mr. Harold Lever: Before the hon. Gentleman continues, it might assist him to know that a bound copy of the Act is available in the "No" Lobby. I take it that he is likely infrequently to be in that Lobby tonight, but if between deploying arguments he wishes to refresh his memory, he will find a copy of the Act there.

Mr. Bessell: I am obliged to the hon. Gentleman, but he will agree that that only emphasises the difficulty in which we find ourselves. I notice that the hon. Member for Worcestershire, South (Sir G. Nabarro), who is seated on the bench before me, has a copy of the Act, and for all I know it is the one to which the Financial Secretary referred.

Sir G. Nabarro: It is not. I am voting "Aye". I got my copy from the "Aye" Lobby.

Mr. Bessell: I am obliged to the hon. Gentleman, not only for handing it to me but for having marked the relevant passages. I take it that he intends to refer to the Act when he speaks, which prevents me from handing his copy round. In any event, if three copies are available, one in the "Aye" Lobby, one in the "No" Lobby and one in the Library, the Financial Secretary will agree that that is not sufficient to enable 600-odd hon. Members to draft appropriate Amendments.
I will not delay the Committee by referring to all the Amendments which we are discussing, save a few which I regard as particularly important. I hope that the Financial Secretary will not attempt to deploy the sort of arguments he used when replying to the debate on the last Amendment. When he reads what he said in the OFFICIAL REPORT in a few weeks' time, if not a few years' time, he will not be proud of those comments, particularly since he is a man of considerable integrity who is respected by hon. Members on both sides, which I hope does not sound patronising.
The Financial Secretary argued that because a group of people in the community suffered from some sort of disability, they should not be exempt from paying purchase tax because, he said, they had to pay this tax to ride about in motor cars. His argument will not stand examination. There are certain groups of people who are entitled to be exempted from certain forms of taxation; for example, because they are compelled to use certain articles. The case of persons being rehabilitated was put when we discussed the last Amendment. My Amendment No. 111 suggests that people who are confined to bed on a permanent basis should be exempt from paying purchase tax on sheets, blankets, pillow cases and similar articles, simply because they suffer a hardship which does not apply to the rest of the community.
A person who is bedridden will use far more sheets, blankets, pillow cases and so on than those of us who enjoy good health and are rarely confined to bed, except for the normal purpose of sleeping. The period of two months


which I mention in my Amendment may not meet the Financial Secretary's wishes. Perhaps it should be two weeks. I had to strike a balance to prevent people suffering from a temporary sickness like 'flu from being able to send out a friend or neighbour to buy new sheets, blankets and pillow cases free of purchase tax. A person confined to bed for a long period or semi-permanently as a result of an especially severe illness should be able, on production of a doctor's certificate, to obtain exemption. People like that will suffer a very much greater hardship than will others.
Turning to Amendment No. 112, it seems ridiculous that the cost of running nursing homes, and hospitals under the National Health Service should be increased. For hospitals coming under the National Health Service, it is quite obvious that the Secretary of State for Social Services will have to make additional allocations. This will be just another example of imposing a tax on the one hand and compensating for it on the other.

Mr. Eric Lubbock: Does not my hon. Friend think that it would be useful if the Financial Secretary were to tell the Committee what additional moneys are to be made available by the Chancellor of the Exchequer to the National Health Service, and whether these institutions will be fully compensated for the additional costs which will fall on them?

Mr. Bessell: I am very grateful to my hon. Friend—

The Deputy Chairman (Mr. Harry Gourlay): Order. The hon. Member for Bodmin (Mr. Bessell) would be out of order if he were to reply to his hon. Friend's question.

Mr. Bessell: I accept your guidance, Mr. Gourlay, but I am sure that you will agree that a very important point—

Mr. Lubbock: On a point of order. Mr. Gourlay. I would not for one moment dispute your Ruling, but surely it would be relevant if the Chancellor were to say that these costs would be fully reimbursed, because my hon. Friend might then not be so inclined to press his Amendment as he might otherwise be, because he would be satisfied that the cost would not fall on the National

Health Service. The added cost would not come, for instance, out of the sums for nurses' pay or for their meals.

The Deputy Chairman: I am seized of the point raised by the hon. Gentleman. It would be in order to make an incidental reference, but on this Amendment we cannot debate the National Health Service.

Mr. Bessell: I was not proposing to discuss the National Health Service, nor do I think my hon. Friend would wish to do so, but unless Amendment No. 112 is accepted it is a matter of fact that the National Health Service, through the hospital service, will have to bear a considerable additional burden of taxation. It is, therefore, clear that, as my hon. Friend suggested, it would be very worth while to know whether the Chancellor of the Exchequer intends to compensate the National Health Service by making a special refund to the Department for this purpose.
Amendment No. 113 seeks exemption from tax on similar purchases made on behalf of boarding schools, youth hostels and like institutions. The tax proposed will, again, considerably increase the cost of running these institutions, to the serious detriment of their users. Hon. Members opposite, and one of my hon. Friends, may not be sympathetic with the idea of the retention of boarding schools, but those of us who have children at them, and I have a son at a boarding school, know that the fees seem to rise every term which passes. The tax proposed will add to the burden of those who choose to have their children educated privately. Nor do I think that anyone would wish to see youth hostels and institutions of that character having to bear this additional burden.
I hope that the Financial Secretary will be among those who will agree with me that there is a special case to be made out for hospitals, schools and other such institutions which will pay a tax which cannot be recovered or, if it is recovered, will be recovered only by means of increasing the cost of living. Those who are confined in their homes and who require additional bed linen will suffer a real hardship and one which could be avoided by a simple exemption on the lines suggested by my Amendment


which, though it may not be perfect, could be put into a form which would be acceptable to the Chancellor on Report.
I shall not refer to some of the other equally important Amendments which are being discussed with Amendment No.
45. I am certain that many hon. Members on this side will wish to speak to those Amendments. I hope that many of the Amendments will commend themselves to the Financial Secretary and that we shall this time have a less disappointing answer than that which we received in the debate on the previous Amendment

Sir G. Nabarro: I hope that the two Members for Oldham—my hon. and learned Friend the Member for Oldham, West (Mr. Bruce Campbell) and the hon. Member for Oldham, East (Mr. Mapp)—who expressed such antipathy towards this increase in purchase tax on household textiles will be seen walking through the Lobbies in unison, thus representing the staple industry of the famous borough of Oldham in Lancashire. If the hon. Member for Oldham, East runs out on it and either abstains or votes with his party, I hope that my hon. and learned Friend the Member for Oldham, West will ensure in his constituency that his counterpart in the other half of Oldham is castigated for his insincerity and hypocrisy.
If there was anything that I disliked more than enough it was the behaviour of the Chancellor on Budget day in the context of the goods we are discussing on the Amendment. Had the right hon. Gentleman been unequivocal and forthright he would have risen in his place on Budget day and said, "I propose to bring into the purchase tax schedules, for the first time for 14 years, bed linen, towels and blankets". All of us sleep between bed linen.

Mr. Lubbock: Not all of us.

Sir G. Nabarro: Does not the hon. Gentleman? He is a coarse fellow. I exclude him at once. All civilised people sleep between bed linen. We understand what bed linen is. All civilised people keep themselves warm with blankets.

Mr. Lubbock: I have an electric blanket, Gerald.

Sir G. Nabarro: The hon. Gentleman must not call me "Gerald" in a debate. I, too, have an electric blanket, but the hon. Gentleman must be careful not to get himself out of order. Electric blankets are taxed as electrical accessories, not at 13¾ per cent. Were I to talk about electric blankets, Mr. Gourlay—I hope I am not instructing you; I am merely suggesting this to you—you would rightly rule me out of order at once.
The Chancellor did not talk about bed linen, blankets and towels. In a

mealy-mouthed fashion characteristic of the right hon. Gentleman he used these equivocating terms:
… I do not think that the distinction between floor coverings, mattresses, cushions, furniture and clothing—which are taxed—and household textiles and cloth—which are not taxed—is a valid one. I therefore propose to bring in the latter category, as well as plastic wall-covering, knitting wool and sewing and dressmaking requisites, and paper tableware and handkerchiefs, at the lowest rate of 13 … per cent."—[OFFICIAL REPORT, 15th April, 1969; Vol. 781, c. 1023.]
The right hon. Gentleman left us to deduce what was intended in the new additions to the purchase tax schedule.
10.30 p.m.
It took the trade nearly 72 hours before it realised fully what was to be brought from household textiles into this purchase tax bracket. It still does not realise entirely what is to be taxed and what is not to be taxed. Here I have the substance, were I to take unfair advantage, of another 400 Parliamentary Questions on purchase tax, so much disputation and doubt is there throughout the textile trade and the retail and wholesale trades serving the textile manufacturing industry as to what is to be taxed and what is not to be taxed. For example, I have a letter here about stockingette. We all know the importance of stockingette.

Sir Douglas Glover: Tights.

Sir G. Nabarro: I am exhorted to read the letter because it is important. It says:
Due to the new Purchase Tax regulations which come into effect as from the 27th May, 1969, Stockingette in its present form will be subject to such tax.
However, in order to exempt this material we must exclude one needle in fifty needles, so giving a continuous ladder in the material. The number of ladders depends on the width of the fabric, i.e., a 12″ wide fabric would probably contain 8–9 ladders.
The above applies only to Stockingette in rolls or cut lengths (including bags) and unbleached and undyed. For Bleached or Coloured Stockingette, the needles must be excluded as above and the fabric cut into lengths of less than 1 yard.
Stockingette Dusters that are stitched at both ends will not be exempt and therefore this material will continue to be manufactured in a perfect state.


Unless our customers inform us to the contrary, all stockingette despatched after the 27th May, 1969, will be made up in the form as mentioned above.
Assuring you of our best attention, we are,
Yours faithfully,
J. C. Ley &amp; Sons Ltd.
The address is Caterbury Road Mills, Old Radford, Nottingham.
I was asked to interpret this and my reply was, "Search me!" No one knows, whether it be stockingette in rolls, stockingette in packs, stockingette part-manufactured, stockingette manufactured only or stockingette in other forms, which is to attract purchase tax at 13¾ per cent. and which is to be exempt. I quote that as one example at random.
I return to something a little more hoary. A face cloth is a household textile. Hitherto it was tax-free. There was always a certain amount of dubiety about it because whereas a face cloth that is used with soap to perform one's ablutions was said to be tax free most of the soap used with the face cloth was subject to tax at 36⅔ per cent. if perfumed, but if plain was not so subject to tax. This whole question of the performance of one's ablutions was surrounded by grave dubiety in the fiscal sense. The hon. Member for Bodmin (Mr. Bessell) will at once take the importance of the point of whether a face cloth is now free of tax.

Dame Joan Vickers: If it is a baby's face cloth it will be taxed.

Sir G. Nabarro: I am coming to babies in a minute. Is a face cloth taxed or not? Even it if it is taxed at 13¾ per cent., why is ordinary toilet soap taxed at 36⅔ per cent.? Why, in a comparable sense, is a tooth brush not taxed whereas toothpaste is taxed at 36⅔ per cent.? Are we all supposed to clean our teeth with salt and water and not buy toothpaste at a chemist's shop? The Financial Secretary need not look so grim and cross with me.

Mr. Harold Lever: I am not grim and cross but nostalgic at hearing the hon. Gentleman's act in rather different circumstances from those in which I have heard it so many times under a Conservative Government.

Sir G. Nabarro: The hon. Gentleman is being unkind. Unless I am much mistaken, I have been talking in this place about purchase tax for 19 years and have never mentioned tooth brushes before.

Mr. Lever: Oh, yes, he has.

Sir G. Nabarro: It is no good the Financial Secretary saying that I have. My memory may have failed me, but I do not believe that I have. [HON. MEMBERS: "What about dentures?"] I am not concerned with dentures. I have all my own teeth. I get through a large number of tooth brushes annually. A tooth brush is an important item in performing one's ablutions. I want to know why toothpaste is taxed at 36⅔ per cent. whereas a tooth brush is let off scot-free.
My hon. Friend the Member for Plymouth, Devonport (Dame Joan Vickers) mentioned babies. Most of us who have families are aware of the cost of having a baby. I am painfully aware myself of the cost of having a baby.

Sir D. Glover: Very painful.

Sir G. Nabarro: I have paid four times over the cost of having a baby. I want to say something about a serious matter this evening. Every year several hundred thousand families in Britain have new babies. In spite of the solicitude for babies which the Labour Party showed on the hustings—Labour candidates were breaking their hearts in 1964 and 1966 about how well they would look after babies in Oldham and Torrington and all over the country, saying how the wicked Tories had oppressed the babies and made it most expensive to have babies—here the Labour Government are putting a tax on motherhood, I call it, for the first time, deliberately inflating the pecuniary cost of producing a child.
I shall exclude baby clothes because most expectant mothers knit most of the baby clothes for their children.

Mr. Scott-Hopkins: Those clothes will be taxed now.

Sir G. Nabarro: I agree, but I shall omit them and refer to the layette—what do you call what goes into the pram?

Mr. Michael Shaw: A baby.

Sir G. Nabarro: The manufactured textiles that go into the pram and on the bed and so on. I shall tell the Committee approximately how much the wicked Treasury Ministers propose to extract from the pockets of mothers of new babies by this iniquitous purchase tax. [Interruption.] I see the hon. Member for Stockport, South (Mr. Orbach) sitting below the Bar of the House bawling at me. Would you please stop him, Mr. Gourlay, and bring him into the Committee so that I may deal with him?

The Temporary Chairman: Order. I would merely say that interruptions are to be deprecated at all times, and when they are from outside the Committee much more so.

Sir G. Nabarro: I am grateful for your protection, Mr. Gourlay. I now return to babies. Take a quilt set for the perambulator. It costs £1 17s. 6d., tax will now be 3s. 4d. For the blankets, at £1 15s. two of them, the tax now will be 3s. 2d.; rugs at £3, two of them, the tax will now be 5s. 6d.; the sheets at 30s. three of them, the tax will be 2s. 6d.; take pillow cases at a guinea, three of them, the tax will be 2s.; take a "Mattrillow" at 18s., two of them, the tax will be 1s. 8d.; take rubber sheets—

Hon. Members: Hear, hear.

Sir G. Nabarro: I do not know why the hon. Member for Buckingham (Mr. Maxwell) is roaring with laughter. He has been through the performance seven times. I have only been through it four times. He knows what rubber sheets are for. It will be 5s. 6d. for the rubber sheets, the tax on them will be 6d. The cot quilt costs 33s., tax 3s. ld.; blankets £3 7s., tax 6s. 4d. for two; sheets £5 10s. for four, the tax 10s. 4d.; pillow cases at 28s. for four, tax 2s. 8d.; rubber sheets, 11s. for one, tax 1s.
Take the miscellaneous items, baby's first blankets, 22s. for two, tax 4s.; face cloths, 6s. for four, tax 8d.; bath towels. 30s., three of them, tax 2s. 9d.; safety pins, 3s. for two packs, tax 4d.; knitting wool, 26s. two packs, tax 2s. 2d.; one pushchair quilt, 58s. 6d., tax 5s. 6d.
The total cost of all those accoutrements for the baby's arrival, leaving out the baby clothes, retail, is £30 1s. 6d. Purchase tax levied is £2 17s. 6d. repre-

senting an increase of 9½ per cent. in the cost of motherhood. The Labour Government's newest tax, the tax on motherhood, is at the rate of 9½ per cent. It is no good the Financial Secretary nodding disapproval—I know that I am hurting him; I intend to hurt him. He is a wicked, uncharitable chap putting a tax on motherhood, and I shall rub it into him at the next election. I can almost hear myself on the hustings now.

Mr. Mapp: I am listening with care to an interesting and humorous speech, but some of us are wondering why there is a gap between the day of birth and the "pins and layette" stage. Why has the hon. Gentleman missed out the napkins? They are subject to the tax.

Sir G. Nabarro: I had not got them on my list. I apologise for excluding the diapers. I did not make up these figures. My source is one of the largest firms in the country engaged in the manufacture of textiles and so on of this kind. The firm is called Mothercare, and it sent me these statistics. I have no doubt they are absolutely accurate. The Financial Secretary need not worry and send off his civil servants for a copy, I intend to give him this copy. I want him to be thoroughly initiated into mothercare matters and to study all the delightful illustrations in the book.
I have said enough to convince the Chairman of my party, my right hon. Friend the Member for Altrincham and Sale (Mr. Barber), what his line should be at the next General Election, and what should be the nature of his propaganda, if he has not already perceived it.
I join my hon. Friend the Member for Worthing (Mr. Higgins), who led me forward so intelligently and who inspired this speech from me this evening. I warmly congratulate him on his speech at the outset of the debate, and I assure him and the whole of my party that I will vote with alacrity, taking with me—carrying if necessary—the hon. Member for Oldham, East and my hon. and learned Friend the Member for Oldham, West, both of whom should be our important confederates in this Amendment.

10.45 p.m.

Mr. Pounder: Together with Amendment 45, several other Amendments have been bracketed, one of which is No. 46


which seeks to exempt linen from the proposed imposition of purchase tax at the rate of 13¾ per cent. I shall be very brief, since many other hon. Members wish to speak.
The Amendment refers to linen, although, as a Member for a Northern Irish constituency, I have Northern Irish linen uppermost in my mind. I understand there is a linen factory in Dumfries, and it would be wrong, therefore, to exclude Dumfries.
There is little doubt that the imposition of purchase tax on a wide range of textiles, which for many years have been exempt, will be harmful to the entire textile industry in the United Kingdom. The hon. Member for Oldham, East (Mr. Mapp), spoke forcefully on behalf of the cotton industry and, of course, the linen industry is also part of the textile trade.
Potential customers will genuinely be tempted to purchase cheap imported cloth. I understand that the present quota system is in operation only until 1971 and that as matters stand at present thereafter the floodgates will be wide open for cheap overseas imports. The serious consequences which would flow from this do not have to be emphasised to the Committee.
It would not surprise me if the Financial Secretary reminded the Committee that until 1955 purchase tax was levied on linen and other textiles; but the reason why textiles were exempted was the worsening employment position in the industry at that time. I well remember, when I was a student accountant, in the 1950s being engaged in the audit of a large number of small and medium sized linen firms in Northern Ireland. In those days this traditional Ulster industry was passing through a critical time. Many firms had gone into liquidation and others were eking out a meagre existence, while a small number of firms who had gambled all their substance on modernisation managed to stay in business. The abolition of purchase tax in 1955 was a lifeline to the industry.
About 35,000 people are now employed in the linen industry and its ancillaries in Northern Ireland. This may not sound a large number, but it nevertheless represents 7·2 per cent. of the entire insured working population in

Northern Ireland, and it will readily be appreciated that I am talking about a major industry and a major source of employment. Inevitably, the imposition of purchase tax will lead to a reduction in home market demand, with a consequential cut-back in production.
It is an accepted industrial axiom that, in order to have a competitive export trade, there must be a buoyant home market which can absorb a fair proportion of the overhead expenses. At present the Irish linen industry has an annual export market valued at £13 million, the bulk of which goes to North America, where it is a substantial dollar earner. Exports amount to 50 per cent. of the total output of the industry.
In view of the even balance between export and home sales, a cut-back in home demand will obviously set off a regrettable trend in reduced export sales. It is unrealistic to imagine that a slackening of home demand will be taken up by greater export sales. I therefore respectfully suggest to the Committee that the imposition of purchase tax at any figure, and certainly at 13¾ per cent., would undeniably have a serious adverse effect on the trading and employment position of the linen industry.
I conclude by trying to correct the impression in some people's minds as a justification for imposing purchase tax on linen that it is a luxury article. That is nonsense. The fact that it is a quality article does not mean that it is necessarily a luxury article. Since when have drying cloths become classified as luxury items? Yet they represent a substantial part of linen production.
I hope that the Chancellor will be prepared to reconsider his decision to levy purchase tax on linen goods, bearing in mind the major rôle which linen manufacture plays in an area such as Northern Ireland, where employment opportunities, although steadily improving, are limited and where, if there were a recession, it could have serious economic consequences for the area.

Mr. Michael Noble: I should like to keep the Committee for only two short minutes, first, to support my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) in his plea on behalf of the jute industry. I remember only too well that four or five years ago,


when the jute industry was in considerable trouble due largely to competition with cheap imports from India and Pakistan, it was the policy of everybody to try to switch as much as possible of their production to higher-quality and, therefore, more remunerative goods. This was successfully done by a number of firms. I hope, therefore, that in considering this problem, the Financial Secretary will find it possible in his heart to give some sort of help to them, because they were trying to achieve in what is a traditionally difficult industry, a viable way out of a difficult problem.
I should also like the Financial Secretary to consider for a moment the problem of a quite different type of textile industry, scattered more on my side of Scotland than in the jute industry side, which is largely in the Dundee area. There has been growing up in recent years a quite considerable number of very small units of people who are making a variety of mostly very attractive textiles on hand looms. This is not, as in the old days, a croft industry, although some crofters, no doubt, take part in it, but is a craft industry and one which is of real value to the whole area. It produces some exports and certainly some very useful goods which tourists buy.
These people are finding it exceedingly difficult not only to pay the purchase tax—this, perhaps, they can often recoup—but, when producing a quite small number of goods and without the support of an efficient industry, keeping all the forms, filling them up and returning them regularly week after week. This discourages people from doing a useful piece of work not only for themselves, but for the community and for the tourist industry.
I hope that in considering the problems of purchase tax on goods of this type, the Financial Secretary may be able in some way to exempt those small industries, which are essentially craft industries and not a large industrial concern.

Mr. David Waddington: I hope that when he replies the Financial Secretary will not advance the same arguments as he advanced in the last debate. He can be very beguiling, but he will have to do a lot better than he did last time to beguile us

when we are dealing with these important matters.
I thought that it was rather disgraceful to suggest that it really did not matter very much increasing the tax on knitting wool because the old people who knitted could be compensated by an increase in social security benefits. That did not seem to me to be a very good argument.

Mr. Harold Lever: It is not a very good argument, and it was never used by me.

Mr. Waddington: I was here throughout the debate, and it was precisely the argument advanced by the Financial Secretary. It is certainly not a valid argument when we are dealing with household textiles and furnishing fabrics. It is beyond argument that many of the people who will be affected by this tax cannot, and will not, be compensated by increased social security benefits. Take, for instance, people who are about to get married. Take the increased cost of a pair of sheets as a result of this new tax. It will be an increase to the tune of 10s. a pair.
In dealing with this group of Amendments we have to remember the history of purchase tax, as has been mentioned by my hon. Friend the Member for Belfast, South (Mr. Pounder). It was not for nothing that in 1955 these goods were exempted. They were exempted because it was acknowledged at that time that the textile industry was suffering from special difficulties. Anybody who has read the Textile Council's Report, published a few days ago, would realise that the textile industry is still facing considerable difficulties. I make no apology for speaking again on this matter, having done so on Second Reading. It is outrageous that the Government for months and months fobbed us off when we asked questions about the textile industry with the reply "Wait for the Textile Council's Report" and, having waited for it, within three weeks of publication gave the industry the biggest kick in the teeth it has had for years and years.
We have to consider the impact on young people of the new tax; the impact on elderly people who have reached the stage in life when they have to spend money on re-equipping themselves with bed linen; and to consider the serious


have on the textile industry which al-effect the increased tax will undoubtedly ready has enough problems on its plate. I hope that when the Financial Secretary comes to reply he will not fob us off with the sort of arguments he advanced an hour or two ago, and that he will not reply in the spirit of the Minister of State when he replied on Second Reading and said what nonsense it was to suggest, when one is arguing in favour of spreading the tax net more widely, that no tax should be imposed on household textiles. That also is not a good argument.
I am prepared to argue in favour of widening the tax net, but what a funny time to impose 13¼ per cent. on a narrow range of necessities bought by elderly people, who certainly did not need clobbering in the way the Chancellor is now choosing to clobber them, and young people about to marry. I ask the Government to give way on this and to think again, very hard indeed.

Mr. F. A. Burden: I would like to ask the Financial Secretary about a closely defined area. The Government, it would be agreed, have constantly increased the cost of living for the young marrieds since they have been in power. They have increased the cost of their homes and made it more difficult for them to make both ends meet.
I do not take the view of some of my hon. Friends that the Chancellor is devious or hard-hearted. I have always found him realistic and approachable. We all know that when a Chancellor introduces a Finance Bill he has a little something up his sleeve and that he can give way where it is considered necessary, and indeed desirable. Under this Bill a further burden is to be imposed on people by the introduction of purchase tax on cot and pram items. I put down an Amendment to deal with this, but because I suggested that it was to deal with pram and cot items, despite the fact that I asked for guidance in getting it into order, I understand that those words put it out of order. Nevertheless, it can be discussed in the context of this debate.
11.0 p.m.
The Government are now proposing to impose purchase tax at 13¾ per cent. on cot and pram items. I listened with great interest to the points made by my hon.

Friend the Member for Nelson and Colne (Mr. Waddington), and I congratulate him on the fluency and cogency of his argument. He said that this rate of purchase tax would increase the cost of a pair of sheets by 10s. As profit is taken on purchase tax plus the price of the goods, the cost of articles will be increased by at least 20 per cent.
The Financial Secretary shakes his head. If he does not believe that he is living in a fool's paradise. He does not know the facts of life, and it is time that he went to the shops and found out what happens when purchase tax is imposed. The hon. Gentleman is the Financial Secretary to the Treasury. What he is saying is that if he were in business he would not charge his profit on the prime cost of the goods but on half the cost of the goods. That is nonsense, as everybody who is engaged in trade, and particularly this trade, knows full well. I see that the hon. Gentleman agrees with me.

Mr. Cyril Bence: Who, me?

Mr. Burden: Well, the hon. Gentleman was shaking his head.

Mr. Bence: When some of us used that argument to Lord Butler, as he now is, he used to say that it was nonsense.

Mr. Burden: I do not care whether Lord Butler said it was nonsense, or whether Fanny Adams said it was nonsense. I know that when merchandise is sold the cost to the buyer includes the profit on the cost of the article plus the purchase tax. It is no good the hon. Gentleman saying "No" unless he can prove it that that is not the case, because the Government have passed legislation which makes it impossible for shops to put their profit on to the total cost of the goods they buy. People will have to pay about 20 per cent. more for pram and cot covers, as well as for household linen.
Under the extended purchase tax orders, cot and pram quilts, cot sheets, pillow cases, blankets and rugs come under the all-embracing heading of
Articles of textile, plastic, paper, or similar material of a kind used for soft furnishings, bedding or other domestic purposes …
There is the strongest case for these proposals being reconsidered, since the following items are already specifically


exempted, on a long-established basis—purely and simply because they are items used by young children: young children's clothing, babies' carrying shawls, bibs and feeders, baby bags with finished head openings and sleeves, or shaped armholes, babies' headgear, infants' napkins—my hon. Friend said that napkins were not excluded, but they are; I am glad to be able to tell him that they are—and perambulators and cots themselves. But now it is proposed to put on a tax—

Sir G. Nabarro: I defer to my hon. Friend's superior knowledge of diapers and the tax arrangements in respect of them. I accept that diapers are excluded. But diaper pins are not excluded, so we now have the further anomaly that the nappy is excluded but the pin is included.

Mr. Burden: Has my hon. Friend thought that safety pins could be extremely dangerous implements, and it may be that some better way of fastening napkins has been found, and this is intended as a deterrent?

The Temporary Chairman (Mr. Bryant Godman Irvine): Order. I can find nothing about safety pins in the Amendment.

Mr. Burden: I was led out of order by my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro), and I apologise. The Bill does not propose to introduce purchase tax on any of the items that I have listed. We must be thankful, because I presume that these are easily identifiable articles, as those required by small children. I hope that the Minister will agree that they are not easily adaptable for any other use. It is obvious that the Chancellor deliberately excluded them from tax, realising the hardship that would be created, especially upon poor families. We must therefore logically assume, that there was no intention whatsoever to include these articles, which are now threatened by purchase tax. They are all required for the welfare and comfort of small children.
I believe that these items slipped in without the knowledge of the Chancellor, and that it was an oversight, and that tonight the hon. Member will be able to give an undertaking that the tax on these items will be removed. I appreciate that the Minister is engaged in

serious conversation at the moment, to see whether he cannot give way, but if he will give me his attention I should like to hammer home my argument a little further. I know the problems that face the Minister. There is often the question of definition. But there is no such problem here.
I have here a letter from the Household Textile Association which says:
This Association, whose members are engaged in the production and distribution of made-up household textiles, is of the opinion that it is incongruous that certain items used by or for babies should be exempted from Purchase Tax whilst others are not. We refer, of course, to the fact that under the extended Purchase Tax orders, cot and pram quilts, sheets and pillow cases, blankets and rugs, etc., become chargeable under the all-embracing heading of 'articles of textile, plastics, paper or similar material of a kind used for soft furnishings, bedding or other domestic purposes'.
They take great exception to this.
Let me add some facts about the increased cost which will now fall on the mother having a new baby. It has been estimated that a minimum equipment comprising one cot quilt, two pillow cases, two blankets, and two flannelette sheets, now costing £12 10s., will go up to £13 10s. That is the absolute minimum, but an average equipment consisting of one pram rug, one cot quilt, two pillow cases, four blankets and six flannelette sheets now costing £20 18s. 6d. will, after the increase of Purchase Tax, cost £23 15s. 4d.
I believe that the hon. Gentleman has a family, and I think he will agree with me that equipping a baby is quite an expensive operation, and there are many other items of expenditure which put great strains on young people's budget when they have a child. I do not believe it is the intention of the Government to single out new parents particularly for the imposition of additional financial hardship.
In many cases when families have their first child they suffer a very considerable cut-back in the family income.
Really I must ask hon. Gentlemen—

The Temporary Chairman: Order. Noise contributes nothing to the proceedings.

Mr. Burden: I am quite sure it is not the intention of the Government to increase the hardship on families with


young children. In many instances, in order to have their first child, the wife, who has probably been contributing considerably to the family income by going out to work, has to give that up, and for the first time there is not only the cost of having the infant, and all that that brings about, but also there is a considerable cut-back in the family income. I hope the hon. Gentleman will take that into consideration when he comes to reply.
If these items are not exempted from tax they will make the financial position of many new parents utterly unbearable. There is no question of being able to avoid the outlay. These are all items which are absolutely necessary when a new child comes into the world. I must ask the Chancellor to accept this Amendment and to give way on this. Surely the cost is not substantial? Whatever the cost may be, would it not be better to lose the tax that will be derived from this rather than attract the odium that will fall on the Government from young mums and dads if they have to pay this very considerable extra cost that will be imposed?
I hope the Chancellor will not exaggerate the difficulties of exempting these particular items because of problems of precise definition. There was no difficulty when items for babies were omitted before. The textile associations are confident that exemption could be safely administered on a maximum size criterion by arrangement with the Customs and Excise. I hope that the hon. Gentleman will be able to give way on this point.

11.15 p.m.

Mr. Harold Lever: We have had an interesting debate, and a great deal of passion. Unlike some hon. Members, I always accept that hon. Members speak on these matters with great sincerity and feeling. It was never part of my case in our similar discussion earlier that we should not be sympathetic to people who are blind or disabled or bedridden. I said that it was impossible effectively to show that sympathy by exempting from purchase tax the classes of people who most excite our compassion. One cannot look to the destination of the goods but only to the category of goods when imposing purchase tax. Any attempt to

do otherwise would destroy any possibility of indirect taxation at all.
Our argument this time has ranged around babies, mothers and the bedridden. I noticed—I am not questioning anyone's sincerity—that the hon. Members for Bodmin (Mrs. Bessell) and Worcestershire, South (Sir G. Nabarro) and others, who were incensed at the notion that the invalid section of the community, who presumably wear out their bed linen faster than the healthy section, seem to have ignored the tax on mattresses, which has existed since 1940 and was doubled in 1962 by the Conservative Government. This seems to have escaped their passion, although it is a not unreasonable inference that the bedridden and the sick appreciate their mattresses at least as much as the rest of us.
I do not suggest that the debate has been widespread, but all this talk of beds and mattresses and linen might produce some curtailment in my speech, in the hope that hon. Members might feel that a brief summary of their arguments might facilitate their practical experience of those desirable household textiles.

Mr. Bessell: Since I was not here in 1962, could the hon. Gentleman tell me whether his party opposed the purchase tax on mattresses? If they did, how does it come about that they are now imposing a purchase tax on blankets?

Mr. Lever: I never keep a tally of the battles between Opposition and Government on the details of purchase tax and the Finance Bill. I have heard hon. Members under one Government passionately denouncing the tax on toothpaste as undermining the nation's health, and the same hon. Members, in right hon. guise, solidly defending the right to increase that same tax a year or so later. This is one of the troublesome aspects of Finance Bill Committees which I have not been able altogether to reassure myself about.
The hon. Member for Worthing (Mr. Higgins) said that there was some doubt in the minds of the public about which articles are affected. All cloths exempt under pre-1955 regulations will be exempt here. We are going back to the pre-1955 position, when there were careful regulations, which are now being restored,


which will exempt all cloths which are intended for industry and which are not household textiles as such.
He asked me about the scope of the tax on items going into further states of production, and especially into nontaxable articles. If a taxable cloth were used in a non-taxable tarpaulin for example, he wanted to know what would happen. There is a general rule, with which many hon. Members may be familiar, that where one uses a taxable article in making a non-taxable article, one can register and get one's supplies in such a form that one does not pay tax on the taxable article, since its ultimate destination is thought, for one reason or another, to be non-taxable.
I assure the hon. Member for Bodmin that in dealing with the points he raised in quoting from his Amendment I am not intending to ridicule his proposal, which, I am sure, comes from a warm heart if not from a practical administrative head. I invite him to examine the words:
… except sheets, pillow cases or blankets, used by persons confined to bed by sickness, and upon the certificate of a medical practitioner, for a period in excess of two months.
He is prepared to accept a period longer or shorter than two months, but he will appreciate that the whole idea of exempting bedlinen on condition that it has been certified that somebody is in bed for two or three months, or for any other specified statutory period, would be impossible to administer.
We would need not only a certificate of illness, but a certificate of occupancy of the sick bed and a certificate to the effect that only the sick person was using the items. This would be a considerable administrative burden, especially if we were to carry the idea into the realm of the other areas into which the hon. Gentleman wants to go, such as boarding schools, hospitals, nursing homes and so on. I am sure that, on reflection, the hon. Gentleman will agree that there are insuperable practical difficulties.

Mr. Bessell: Is not the Financial Secretary aware that during the war special allocation of coupons were issued for clothing and other articles of a similar nature for cases such as this? There were administrative difficulties, but they

did not prove insuperable. I am sure that they could be overcome for the permanently bedridden.

Mr. Lever: I cannot see a satisfactory analogy between issuing coupons entitling people to buy rather more of certain articles and making tax free articles on which the rest of the population must pay tax.
I must disappoint hon. Members who have been able to lash themselves into a state of indignation over this matter. I understand the sincerity of their feelings on behalf of the sick, disabled and blind, but what they are discussing is not the original sin of this Government. This has been the practice of successive Governments, who have said that one cannot exempt unidentifiable articles from purchase tax in this way. We have still left exempt specialised equipment for people who are bedridden or sick, and we will no doubt continue to do that wherever possible, but we cannot exempt items in general use.
It was suggested that this would be a death blow to the textile industry. This is nonsense because the languishing condition of the cotton textile industry, to which my hon. Friend the Member for Oldham, East (Mr. Mapp) referred, has been arrived at during the last few years, when its products have been wholly exempt.
My hon. Friend must not anticipate events. Whatever the industry's present condition, it cannot be attributed to a tax that has not yet come into force. I hope that my hon. Friend will, with this assurance, feel relieved in the knowledge that this tax cannot have produced the difficulties at present being experienced by the industry and will come into the Lobby with us. Next year, if he finds that some damage has been done and if he has evidence to support that view, he might consider abstaining.
My right hon. Friend has commented on the question of this being a blunt instrument for dealing with the regions, particularly when one bears in mind the possibility of giving exemptions to products which may or may not be made in particular regions.
I have left aside the point made by the hon. Member for Worthing about the retail trade, which is treated in exactly the same way for the purpose of this tax


as it is in relation to any other purchase tax change. If the hon. Gentleman wants further details, I will let him have them at a convenient time. I assure him that it applies on this score as it does in every other purchase tax change.
For the reasons which I gave before, and which I do not wish to repeat, those who are anxious to broaden the tax basis and make it less distorted in its consequences will opt for this sort of tax at a low level instead of adding to the burden on goods which are already sufficiently highly taxed—

Mr. Bruce-Gardyne: I do not know whether the Financial Secretary's reference to the regional arguments is all that he proposes to say about the special position of the jute industry, which is not a regional matter but a separately identifiable issue which has not raised the objections which the hon. Gentleman earlier mentioned.

Mr. Lever: The same argument applies to particular industries. I do not think that any case has been sufficiently made out for exemption from a very small tax—which is not 20 per cent., as the hon. Gentleman believes. His hon. Friend the Member for Worcestershire, South is, I think, more experienced and accurate on this point. He is roughly right in saying that between 9½ per cent. and 10 per cent. is the incidence of this tax on retail prices. It is no use the hon. Gentleman shaking his head. On this issue, the hon. Member for Worcestershire, South, who is an experienced man and not, I think, prone to understatement in matters of this nature, agrees with me—

Sir G. Nabarro: Is not the Financial Secretary not now admitting, for the benefit of posterity, that what I alluded to as a tax on motherhood is between 9½ per cent. and 10 per cent.? Would he make it perfectly clear—I want it on the record—that it is a tax on motherhood of between 9½ per cent. and 10 per cent.?

Mr. Lever: This is not tax on mothers, thought there are some hon. Members who might think that in some cases one would wish to put a tax on particular mothers of particular children. This is merely a tax on certain textiles which, admittedly, form part of the expenses of

motherhood and, of course, it naturally adds to the cost of it. But it is a general tax on household textiles.
For these reasons, I would urge the Committee—

Mr. Burden: Will the hon. Gentleman give his arguments for not taking off the tax on prams and cots, and items for small children? Will he also tell the Committee how he arrives at the view that whereas the charges are 13¼ per cent. the retail price will rise only by 9 per cent.?

Mr. Lever: Prices will rise by between 9½ per cent. and 10 per cent. on the purchase tax as calculated on the wholesale price. That is the short answer to the hon. Gentleman.
For the reasons I have given, I hope that the Committee will now feel able to come to a decision favourable to the Chancellor of the Exchequer's proposals and reject the Amendment.

Mr. Higgins: I very much hope that the Committee will do no such thing. It is perfectly clear that in this Amendment, as in many other Amendments, we seek to do something to help the balance of payments, about which the Government seem to do nothing at all in the Budget. It is quite clear that if one imposes an ad valorem tax of this kind it will be likely to fall more on the dearer home products than on the cheaper import end of the market. I say in all seriousness that I am very disappointed with the Financial Secretary's reply, because quite apart from the merits or demerits of the tax increase as such there is grave concern in the industry on the very points to which I have already referred. The answers given by the hon. Gentleman on those points are not adequate.
I asked, first of all, what was the position in regard to industrial cloths. The hon. Gentleman said that the position was the same as it was in 1955. If that is so, it would have been the simple answer to give those firms that have been in business as long as that, but they have not been given that answer, and they are still in grave confusion about the position. It would appear that the officers under him are not giving them the assurances that they require.
11.30 p.m.
The second point I raised was with regard to the imposition of tax at one stage when the product which it was used in was not taxed. The hon. Gentleman said that it is clear that it is registration certificates. I quote just one example. A large producer of cotton textiles had, as of the 13th of this month, a list of 17 firms which had not so far provided a tax registration certificate, including firms as large as I.C.I., Courtaulds, and so on. Given the state of the post, and given the fact that the tax comes into operation on 26th and 27th May, the Financial Secretary's answer was not satisfactory. I hope that he will pursue the matter within the industry at the earliest possible moment and with the greatest possible urgency.
Again, I asked a specific question about book binding. I got absolutely no reply from the Financial Secretary. I asked a specific question with regard to the question of discrimination, the way in which the tax will fall against a large, efficient, high quality producer as against producers in the middle and at the tail end of the market. I got absolutely no semblance of reply from the hon. Gentleman. Therefore, on all these points, about which the industry itself is gravely concerned, the hon. Gentleman has failed to take this opportunity of clarifying the position.

Mr. Harold Lever: It is impossible in this Committee for me to define with legal exactitude and comprehensiveness the vast number of exemptions covered under the 1955 Regulations. I will, however, take the hon. Gentleman's point

and ensure, if it is not already being done, that all those affected are fully informed in detail—it spreads over many pages—of the definitions. I did not think that the Committee would want me to read all that at this hour. If the hon. Gentleman wants it, I shall be happy to see that any particular area is informed with special care on the points he raised.

Mr. Higgins: The hon. Gentleman could have given a clearer answer than that which he gave and he did not deal with the three points I have mentioned. This is not a satisfactory state of affairs. Now, more than a month after the Budget, and with the tax due to take effect on the 26th or 27th of this month, we are told that the Financial Secretary will chase the matter up. This is not good enough. I will not labour the point any more. I should have thought that I have made sufficient of it, and I hope that the hon. Gentleman will now do what he can in the short time available to reassure the industry on these points.
The fundamental point has been made by my hon. Friends that this is an untimely measure coming on top, as it does, of the Textile Council's Report. It is one which hits, as my hon. Friends have stressed at great length, invalids and those with young children. I do not believe that it is a measure which should be applied at this time. I hope that my right hon. and hon. Friends and those who have spoken against it from other parts of the Committee will join us in the Lobby in support of the Amendment.

Question put, That the Amendment be made:—

The Committee divided: Ayes 212, Noes 256.

Division No. 229.]
AYES
[11.34 p.m.


Alison, Michael (Barkston Ash)
Boyle, R. Hn. Sir Edward
Crouch, David


Allason, James (Hemel Hempstead)
Braine, Bernard
Crowder, F. P.


Amery, Rt. Hn. Julian
Brewis, John
Cunningham, Sir Knox


Astor, John
Brinton, Sir Tatton
Dalkeith, Earl of


Awdry, Daniel
Bromley-Davenport, Lt.-Col. Sir Walter
Dance, James


Baker, Kenneth (Acton)
Brown, Sir Edward (Bath)
d'Avigdor-Goldsmid, Sir Henry


Baker, W. H. K. (Banff)
Bruce-Gardyne, J.
Dean, Paul


Balniel, Lord
Buchanan-Smith, Alick (Angus, N &amp; M)
Deedes, Rt. Hn. W. F. (Ashford)


Barber, Rt. Hn. Anthony
Buck, Antony (Colchester)
Digby, Simon Wingfield


Batsford, Brian
Bullus, Sir Eric
Dodds-Parker, Douglas


Beamish, Col. Sir Tufton
Burden, F. A.
Doughty, Charles


Bennett, Dr. Reginald (Gos. &amp; Fhm)
Campbell, B. (Oldham, W.)
Drayson, G. B.


Berry, Hn. Anthony
Campbell, Gordon (Moray &amp; Nairn)
du Cann, Rt. Hn. Edward


Bessell, Peter
Channon, H. P. G.
Eden, Sir John


Biffen, John
Clark, Henry
Elliot, Capt. Walter (Carshalton)


Biggs-Davison, John
Clegg, Walter
Elliott, R. W. (N'c'tle-upon-Tyne, N.)


Birch, Rt. Hn. Nigel
Cooke, Robert
Emery, Peter


Blaker, Peter
Cordle, John
Errington, Sir Eric


Boardman, Tom (Leicester, S. W.)
Corfield, F. V.
Eyre, Reginald


Body, Richard
Costain, A. P.
Farr, John




Fisher, Nigel
Lane, David
Renton, Rt. Hn. Sir David


Fortescue, Tim
Legge-Bourke, Sir Harry
Rhys Williams, Sir Brandon


Foster, Sir John
Lewis, Kenneth (Rutland)
Ridley, Hn. Nicholas


Galbraith, Hn. T. G.
Lloyd, Rt. Hn. Geoffrey (Sut'n C'dfield)
Ridsdale, Julian


Gilmour, Ian (Norfolk, C.)
Lloyd Ian (P'tsm'th, Langstone)
Rodgers, Sir John (Sevenoaks)


Glover, Sir Douglas
Lloyd, Rt. Hn. Selwyn (Wirral)
Rossi, Hugh (Hornsey)


Glyn, Sir Richard
Longden, Gilbert
Russwll, Sir Ronald


Godber, Rt. Hn. J. B.
Lubbock, Eric
St. John-Stevas, Norman


Goodhart, Philip
McAdden, Sir Stephen
Scott, Nicholas


Goodhew, Victor
MacArthur, Ian
Scott-Hopkins, James


Gower, Raymond
Maclean, Sir Fitzroy
Sharples, Richard


Grant-Ferris, R.
Macleod, Rt. Hn. Iain
Shaw, Michael (Sc'b'gh &amp; Whitby)


Gresham Cooke, R.
Macmillan, Maurice (Farnham)
Silvester, Frederick


Grieve, Percy
McNair-Wilson, Michael
Sinclair, Sir George


Gurden, Harold
McNair-Wilson, Patrick (New Forest)
Smith, Dudley (W'wick &amp; L'mington)


Hall, John (Wycombe)
Maddan, Martin
Smith, John (London &amp; W'minster)


Hall-Davis, A. G. F.
Maginnis, John E.
Speed, Keith


Hamilton, Lord (Fermanagh)
Marples, Rt. Hn. Ernest
Stainton, Keith


Hamilton, Michael (Salisbury)
Marten, Neil
Steel, David (Roxburgh)


Harris, Frederic (Croydon, N. W.)
Maude, Angus
Stoddart-Scott, Col. Sir M.


Harris, Reader (Heston)
Maxwell-Hyslop, R. J.
Summers, Sir Spencer


Harrison, Brian (Maldon)
Maydon, Lt.-Cmdr. S. L. C
Tapsell, Peter


Harrison, Col. Sir Harwood (Eye)
Mills, Peter (Torrington)
Taylor, Sir Charles (Eastbourne)


Harvey, Sir Arthur Vere
Mills, Stratton (Belfast, N.)
Taylor, Edward M. (G'gow, Cathcart)


Harvie Anderson, Miss
Miscampbell, Norman
Taylor, Frank (Moss Side)


Hastings, Stephen
Mitchell, David (Basingstoke)
Temple, John M.


Hawkins, Paul
More, Jasper
Thatcher, Mrs. Margaret


Hay, John
Morgan-Giles, Rear-Adm.
Thorpe, Rt. Hn. Jeremy


Heald, Rt. Hn. Sir Lionel
Morrison, Charles (Devizes)
Turton, Rt. Hn. R. H.


Heseltine, Michael
Munro-Lucas-Tooth, Sir Hugh
Vaughan-Morgan, Rt. Hn, Sir John


Higgins, Terence L.
Murton, Oscar
Vickers, Dame Joan


Hiley, Joseph
Nabarro, Sir Gerald
Waddington, David


Hill, J. E. B.
Neave, Airey
Walker, Peter (Worcester)


Holland, Philip
Noble, Rt. Hn. Michael
Wall, Patrick


Hooson, Emlyn
Nott, John
Walters, Dennis


Hordern, Peter
Onslow, Cranley
Ward, Dame Irene


Hunt, John
Orr, Capt. L. P. S.
Weatherill, Bernard


Hutchison, Michael Clark
Orr-Ewing, Sir Ian
Wells, John (Maidstone)


Iremonger, T. L.
Osborn, John (Hallam)
Whitelaw, Rt. Hn. William


Jenkin, Patrick (Woodford)
Page, Graham (Crosby)
Wiggin, A. W.


Johnson Smith, G. (E. Grinstead)
Pardoe, John
Williams, Donald (Dudley)


Jones, Arthur (Northants, S.)
Peel, John
Wilson, Geoffrey (Truro)


Jopling, Michael
Peyton, John
Winstanley, Dr. M. P.


Kaberry, Sir Donald
Pink, R. Bonner
Wood, Rt. Hn. Richard


Kerby, Capt. Henry
Pounder, Rafton
Woodnutt, Mark


Kershaw, Anthony
Price, David (Eastleigh)
Worsley, Marcus


King, Evelyn (Dorset, S.)
Prior, J. M. L.
Wright, Esmond


Kirk, Peter
Pym, Francis
Younger, Hn. George


Kitson, Timothy
Quennell, Miss J. M.



Knight, Mrs. Jill
Ramsden, Rt. Hn. James
TELLERS FOR THE AYES:


Lambton, Viscount
Rawlinson, Rt. Hn. Sir Peter
Mr. Anthony Royle and


Lancaster, Col. C. G.
Rees-Davies, W. R.
Mr. Humphrey Atkins.




NOES


Albu, Austen
Brown, R. W. (Shoreditch &amp; F'bury)
Edelman, Maurice


Allaun, Frank (Salford, E.)
Buchan, Norman
Edwards, Robert (Bilston)


Alldritt, Walter
Buchanan, Richard (C'gow, Sp'burn)
Edwards, William (Merioneth)


Anderson, Donald
Callaghan, Rt. Hn. James
Ellis, John


Archer, Peter
Cant, R. B.
English, Michael


Ashton, Joe (Bassetlaw)
Carmichael, Neil
Ennals, David


Atkins, Ronald (Preston, N.)
Chapman, Donald
Ensor, David


Atkinson, Norman (Tottenham)
Coe, Denis
Evans, Fred (Caerphilly)


Bagier, Gordon A. T.
Coleman, Donald
Evans, Ioan L. (Birm'h'm, Yardley)


Barnes, Michael
Corbet, Mrs. Freda
Faulds, Andrew


Barnett, Joel
Crawshaw, Richard
Fernyhough, E.


Beaney, Alan
Crosland, Rt. Hn. Anthony
Finch, Harold


Bence, Cyril
Davldson, Arthur (Accrington)
Fitt, Gerard (Belfast, W.)


Benn, Rt. Hn. Anthony Wedgwood
Davies, G. Elfed (Rhondda, E.)
Fletcher, Rt. Hn. Sir Eric (Islington, E.)


Bidwell Sydney
Davies, Dr. Ernest (Stretford)
Fletcher, Raymond (Ilkeston)


Binns, John
Davies, Rt. Hn. Harold (Leek)
Fletcher, Ted (Darlington)


Bishop, E. S.
Davies, Ifor (Cower)
Foley, Maurice


Blackburn, F.
de Freitas, Rt. Hn. Sir Geoffrey
Foot, Rt. Hn. Sir Dingle (Ipswich)


Blenkinsop, Arthur
Dell, Edmund
Foot, Michael (Ebbw Vale)


Booth, Albert
Dempsey, James
Ford, Ben


Boston, Terence
Diamond, Rt Hn. John
Forrester, John



Dickens, James
Fraser, John (Norwood)


Bottomley, Rt. Hn. Arthur
Dobson, Ray
Freeson, Reginald


Boyden, James
Doig, Peter
Gardner, Tony


Bradley, Tom
Dunn, Jamee A.
Garrett, W. E.


Bray, Dr. Jeremy
Dunnett, Jack
Gordon Walker, Rt. Hn. P. C.


Brooks, Edwin
Dunwoody, Mrs. Gwyneth (Exeter)
Gray, Dr. Hugh (Yarmouth)


Brown, Hugh D. (G'gow, Provan)
Dunwoody, Dr. John (F'th &amp; C'b'e)
Greenwood, Rt. Hn. Anthony


Brown, Bob (N'c'tle-upon-Tyne, W.)
Eadie, Alex
Gregory, Arnold







Grey, Charles (Durham)
McBride, Neil
Rees, Merlyn


Griffiths, David (Rother Valley)
McCann, John
Rhodes, Geoffrey


Griffiths, Eddie (Brightside)
MacColl, James
Roberts, Albert (Normanton)


Griffiths, Will (Exchange)
Macdonald, A. H.
Roberts, Rt. Hn. Goronwy


Gunter, Rt. Hn. R. J.
McGuire, Michael
Robertson, Jotan (Paisley)


Hamilton, James (Bothwell)
McKay, Mrs. Margaret
Robinson, Rt. Hn. Kenneth (St. P'c'as)


Hamilton, William (Fife, W.)
Mackenzie, Gregor (Rutherglen)
Rodgers, William (Stockton)


Hamling, William
Mackie, John
Roebuck, Roy


Hannan, William
Mackintosh, John P.
Rowlands, E.


Harper, Joseph
Maclennan, Robert
Shaw, Arnold (Ilford, S.)


Harrison, Walter (Wakefield)
McNamara, J. Kevin
Sheldon, Robert


Hart, Rt. Hn. Judith
MacPherson, Malcolm
Shore, Rt. Hn. Peter (Stepney)


Hattersley, Roy
Mallalieu, E. L. (Brigg)
Silkin, Rt. Hn. John (Deptford)


Hazell, Bert
Mallalieu, J. P. W. (Huddersfield, E.)
Silkin, Hn. S. C. (Dulwich)


Healey, Rt. Hn. Denis
Manuel, Archie
Silverman, Julius


Heffer, Eric S.
Marks, Kenneth
Skeffington, Arthur


Hilton, W. S.
Marquand, David
Slater, Joseph


Hobden, Dennis
Marsh, Rt. Hn. Richard
Small, William


Hooley, Frank
Maxwell, Robert
Spriggs, Leslie


Houghton, Rt. Hn. Douglas
Mellish, Rt Hn. Robert
Stonehouse, Rt. Hn. John


Howarth, Robert (Bolton, E.)
Mendelson, John
Strauss, Rt. Hn. G. R.


Howell, Denis (Small Heath)
Mikardo, Ian
Summerskill, Hn. Dr. Shirley


Howie, W.
Millan, Bruce
Swain, Thomas


Hoy, James
Milne, Edward (Blyth)
Taverne, Dick


Huckfield, Leslie
Miller, Dr. M. S.
Thomas, Rt. Hn. George


Hughes, Hector (Aberdeen, N.)
Molloy, William
Thomson, Rt. Hn. George


Hughes, Roy (Newport)
Morgan, Elystan (Cardiganshire)
Tinn, James


Hunter, Adam
Morris, John (Aberavon)
Tomney, Frank


Hynd, John
Moyle, Roland
Tuck, Raphael


Irvine, Sir Arthur (Edge Hill)
Mulley, Rt. Hn. Frederick
Urwrn, T. W.


Janner, Sir Barnett
Murray, Albert
Varley, Eric G.


Jay, Rt. Hn. Douglas
Neal, Harold
Wainwright, Edwin (Dearne Valley)


Jeger, Mrs. Lena (H'b'n &amp; St. P'cras, S.)
Newens, Stan
Walker, Harold (Doncaster)


Jenkins, Hugh (Putney)
Oakes, Gordon
Wallace, George


Jenkins, Rt. Hn. Roy (Stechford)
Ogden, Eric
Watkins, David (Consett)


Johnson, Carol (Lewisham, S.)
Oram, Albert E.
Watkins, Tudor (Brecon &amp; Radnor)


Johnson, James (K'ston-on-Hull, W.)
Orbach, Maurice
Wellbeloved, James


Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)
Orme, Stanley
Wells, William (Walsall, N.)


Jones, J. Idwal (Wrexham)
Oswald, Thomas
Whitaker, Ben


Jones, T. Alec (Rhondda, West)
Owen, Dr. David (Plymouth, S'tn)
White, Mrs. Eirene


Kelley, Richard
Owen, Will (Morpeth)
Whitlock, William


Kerr, Russell (Feltham)
Padley, Walter
Wilkins, W. A.


Lawson, George
Page, Derek (King's Lynn)
Willey, Rt. Hn. Frederick


Leadbitter, Ted
Pannell, Rt. Hn. Charles
Williams, Alan (Swansea, W.)


Lee, Rt. Hn. Frederick (Newton)
Park, Trevor
Williams, Alan Lee (Hornchurch)


Lee, John (Reading)
Parker, John (Dagenham)
Williams, Clifford (Abertillery)


Lestor, Miss Joan
Parkin, Ben (Paddington, N.)
Williams, Mrs. Shirley (Hitchin)


Lever, Harold (Cheetham)
Parkyn, Brian (Bedford)
Williams, W. T. (Warrington)


Lever, L. M. (Ardwick)
Pavitt, Laurence
Willis, Rt. Hn. George


Lewis, Arthur (W. Ham, N.)
Pearson, Arthur (Pontypridd)
Wilson, Rt. Hn. Harold (Huyton)


Lewis, Ron (Carlisle)
Peart, Rt. Hn. Fred
Wilson, William (Coventry, S.)


Lipton, Marcus
Pentland, Norman
Winnick, David


Lomas, Kenneth
Perry, Ernest G. (Battersea, S.)
Woof, Robert


Loughlin, Charles
Perry, George H. (Nottingham, S)
Wyatt, Woodrow


Luard, Evan
Prentice, Rt. Hn. R. E.



Lyon, Alexander W. (York)
Price, Thomas (Westhoughton
TELLERS FOR THE NOES:


Lyons, Edward (Bradford, E)
Price, William (Rugby)
Mr. Alan Fitch and


Mabon, Dr. J. Dickson
Probert, Arthur
Mr. Charles R. Morris.

11.45 p.m.

Mr. Bessell: I beg to move Amendment No. 47, in page 74, line 30, leave out paragraph 4.

The Temporary Chairman (Mr. Bryant Codman Irvine): It will be convenient also to take with this Amendment, Amendment No. 67, line 40, at end insert:
(d) in paragraph (1) of the exemptions after the word 'fabrics' on the last occasion on which it occurs there shall be inserted the words 'other than window display material of jute'.

Mr. Bessell: I say at once to the Financial Secretary that this is largely a probing Amendment. As the Schedule

stands, we have this rather complicated piece of legislation reading:
In Group 7—
(a) after the words 'otherwise treated' there shall be inserted the words 'and plastic sheeting in the piece or in cut lengths, being sheeting of a kind suitable for making garments or curtains, tablecloths and similar soft furnishings'.
That removes the words:
Tissues and fabrics not exceeding 12 inches in width.
In (4)(b) we read:
For the words 'Tissues and fabrics not exceeding 12 inches in width' there shall be substituted the words 'Articles not comprised below in this Group'.
I take it that, looking at page 128 of the 1963 Purchase Tax Act, this means


that those items listed as being exempt, fabrics of various kinds, braids, fringes, trimmings, jute, glass fibre, asbestos fabrics, etc., are included.
This is also the effecr of (4) (c) and (d). We have a rather strange change, because instead of the adhesive gloss tape which was acceptable, provided it did not exceed three inches in width, it is now to be exempted at six inches in width. I want to know how much it is anticipated will be raised by way of the tax by including this group of items under the list of those which will now attract tax. What is this likely to mean in a full year in terms of revenue, and how valuable is it to create this additional complicated piece of taxation?
I say "complicated" because of the number of exemptions which remain and the difficulty that must be caused to retailers and others who sell these materials, in having to decide which are exempted items. There will have to be purchase tax returns and so on. If the Financial Secretary can satisfy me that there is to be a substantial increase in revenue as a result of the inclusion of these items I would not wish to press this to a Division, because I do not think that these items are in anything like the same categories as those we discussed earlier, when hardship will be caused. I am satisfied that it will be caused by virtue of the Committee rejecting the Amendments tabled by this side of the Committee.
I am only continuing to talk to enable the Financial Secretary to get the answer from the box. I believe that it is coming now—no, there is further discussion. I believe that the answer is at hand now.

Mr. Broce-Gardyne: I wish to refer briefly to Amendment No. 67, which proposes to insert in paragraph (1) of the exemptions in the principal Act of 1963, after "fabric" the words:
other than window display material of jute".
The point about this is that there may have been a genuine misconception in the way in which the new purchase tax arrangements are to be applied. Once again, I am not absolutely certain whether the Amendment is in the right place. I see the Financial Secretary shaking his head, so it appears that it is

not. I hope that he will extend some sympathy to me, because, if one goes back to the principal Act, one finds that one is dealing with exemptions on exemptions on exemptions, and these are further complicated by the Amendments which have been introduced in Schedule 6.
The effect of the Amendment to the Schedule, as I understand it, and the Financial Secretary will correct me if I am wrong, is to include in Group 7 of the principal Act all articles not comprised among the exemptions, regardless of the fact that they are more than 12 inches in width, which previously made them exempt. Among the exemptions, clearly set out as exemption No. (1), is jute. But then, unfortunately, and this is where the complication comes in, under the same heading of exemption No. (1) there is a parenthesis which states:
fabrics of the following descriptions (not being …".
There follows a series of items which are exempted from the exemptions, and which presumably attract tax, the last one being:
… fabrics which have been shaped or partly made-up or have been bleached, printed, embroidered or otherwise decorated".
I understand from information received from firms in my constituency that according to this parenthesis window display material of jute would now be subject to tax under Schedule 6. If those firms have been misinformed, I hope that the Financial Secretary will be able to put this right.
The reason for waiving the exemption previously enjoyed by window display materials of jute is that it has been discovered that window display material which is designed to back a window display in a shop—and this is clearly not the type of end use which would attract purchase tax—can also be used as curtaining material. Because it was used and even sold as curtaining material it was felt that it should attract purchase tax. However, jute material cannot be used for curtaining because it inevitably fades in sunlight and is therefore unsuitable for this purpose. When it is sold as window display material the purchasers are warned that it should not be resold for curtaining, and it should not, therefore, attract purchase tax. The fact that it is to attract the tax—my


understanding from firms in my constituency is clearly that they have been told that it does fall within the Schedule—must clearly have arisen from a misunderstanding. I hope that the Financial Secretary will be able to put this right.

Mr. Harold Lever: As far as I can have it estimated, without any pretence to accuracy, the cost of cancelling the extension of the tax to cloth would be about £7 million a year. In practice, it would be difficult to make that withdrawal alone and the consequential withdrawals which would be likely to follow would cost, together with the £7 million, a total of about £23 million a year. It works out rather expensive.
I am advised that the Amendment of the hon. Member for South Angus (Mr. Bruce-Gardyne) is meaningless as it stands. This is no reflection upon the hon. Member. He would have had to show considerable ingenuity to have drafted his purpose, in the circumstances, to give effect to what he intended. I understand his intention to be that felt, hemp and hessian fabrics used for window display should be exempt when processed. They are already exempt when used for window display purposes in unprocessed forms, and so is jute. Once it has been processed, bleached, printed, embroidered or otherwise decorated, it becomes liable to tax.
It is quite impossible to give effect even to the hon. Member's intention in the Amendment, because it would involve our determining, at the stages of manufacture when tax liability has to be determined, what was the intended use of the article. That would be quite beyond our power. Moreover, in principle, it is not the ultimate use of an article, which may have many different uses, which determines its taxability. One has inevitably to rely on broad categories. I have already dealt with the possible regional appeal, which the hon. Member disavowed on the previous occasion, concerning jute and hessian.

Mr. Bruce-Gardyne: There seems to be confusion about this. I understand from firms in my constituency that in any event, when the end use of a product is clearly commercial, purchase tax will not be payable. The only reason why purchase tax is payable in the case of

window-dressing material is that it has been found that other types of textile window-dressing material can be used for curtaining, whereas jute cannot. This is the distinction that I was trying to make. I apologise if I tried to do so in the wrong place.

Mr. Lever: I was endeavouring to divine the hon. Member's intentions. I can only say that the end purpose is relevant only where that end purpose is exclusively, or nearly exclusively, the end purpose of the material itself. In those circumstances, I do not think that I can help the hon. Gentleman. If, however, he can satisfy me that the only end purpose of this material is commercial, I will certainly look at the matter again.

Mr. Bessell: If I may use a well-established Parliamentary formula with which the Financial Secretary will be familiar, on the understanding that we may want to look at this matter again on Report, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Mr. Bessell: I beg to move Amendment No. 122, in page 75, line 10, leave out "potato crisps".

The Temporary Chairman (Mr. Bryant Godman Irvine): With this Amendment it will be convenient to take also the following Amendments:
Amendment No. 123, in page 75, line 15, at end insert
unless such products are packaged within a development area as designated by the Board of Trade".
Amendment No. 124, in line 15, at end insert
unless such products are packaged in Scotland".
Amendment No. 125, in line 15, at end insert
unless such products are packaged in Wales".
Amendment No. 126, in line 15, at end insert
unless such products are packaged in Devon and Cornwall".

Mr. Bessell: This is a rather different Amendment in the sense that we are on quite positive ground. I do not suggest that I am seeking to probe the intentions of the Chancellor of the Exchequer or to ascertain the sum which is likely to be


involved as a result of this tax. My purpose in moving the Amendment is to oppose the proposal contained in the Schedule at line 11, page 75.

[MR. HARRY GOURLAY in the Chair]

12 m.

It seems to me to be a very strange decision for the Government to have taken to impose purchase tax of 22 per cent. on the items which are listed in paragraph 6. Nothing seems more absurd to me than to include potato crisps among those items. I say that because it is an item of food consumed on quite a large scale by a number of young people and others who want a quick snack. It is a wholesome item of food and is well worth selling as cheaply as possible. As the Financial Secretary well knows, there is one major company whose name is always associated with potato crisps in this country and that company has recently been taken over by an American group which has expended a considerable sum in expanding its activities and increasing the number of factories and their output. It is no secret that this has been a costly and not particularly profitable operation. Although I have not been in touch with them, nor they with me, the imposition of purchase tax will hit them badly and this is a particularly unfortunate choice of article for the imposition of tax, because, as with many other firms considering entering the British wholesale or retail trade, this must have come as a shock to the American corporation.

It might act as a deterrent to others who might come into this country with expertise, specialised knowledge, and the ability to improve the whole of our capacity and output. If a particular industry is suddenly singled out in this way, and if the Financial Secretary is unable to give an assurance, will he before Report stage look at the effect on this company whose name I have deliberately avoided mentioning, to see whether it is wise to impose a tax on the food items when the consequences at which I have just hinted might result?

Turning briefly to the other Amendments, I want to pay particular attention to Amendment No. 123. I am suggesting by that Amendment that at the end of this group there should be included the words

unless such products are packaged within a development area as designated by the Board of Trade.

I can imagine that the Financial Secretary will say, in reply, "If we exempted the payment of purchase tax on items in this group, if produced within a development area, the immediate result would be that factories would move to development areas to escape purchase tax and to be able to sell the items more cheaply to the general public". Of course they would, and that is exactly my intention. I make no secret of the fact that I want to further the Government's avowed policy of giving the maximum possible assistance to areas designated as development areas.

I include in that Cornwall, and my constituency. There is nothing more desirable than that factories should be established in South-East Cornwall making crisps, since the potatoes—
and similar products made from the potato, or from potato flour, or from potato starch, and savoury food products obtained by the swelling of cereals or cereal products; and salted or roasted nuts other than nuts in shell.
are farmed or can be found in the area, and it would be much cheaper for manufacturers to produce these goods in development areas, particularly the West Country and Cornwall, than if they have to produce them in some big industrial area where the base product has to be taken from rural areas and prepared.

My proposal that these products should be exempted provided they are produced within development areas is in line with the Government's programme, and even though, as I said earlier in relation to potato crisps, I should not expect the Financial Secretary to accept the Amendment tonight, I hope that he will look at this matter again and see whether he can make some concession before we get to the Report stage.

Mr. Robert Cooke: The hon. Member for Bodmin (Mr. Bessell) mentioned a nationally known firm which we must not mention as being pretty well the sole producer of that vital product the potato crisp.

Mr. Bessell: The main producer.

Mr. Cooke: I should like the hon. Gentleman to understand, and I hope the Minister knows, that a certain other nationally known concern in the Bristol


area has diversified into this field and I believe that its potato crisps are just as good. I hope that if consideration is given to the chips belonging to the hon. Member for Bodmin, the Bristol chips will be given the same thought and care.

Mr. Harold Lever: I think that I must leave the two hon. Members to chip each other in accordance with their constituency interests. I can only say that the question whether one should apply to crisps the tax that is already applied to confectionery and ice cream is a matter of judgment and does not lend itself to detailed expatiation.
The Chancellor's judgment is that if someone has a sweet tooth he contributes to the revenue, and if he has a savoury tooth he contributes to the revenue. This is the counterpart of ice cream for those who do not have a sweet tooth. It does not mean that my right hon. Friend is opposed to that entirely wholesome food, whether sweet or savoury, which is brought within the revenue charge.
It is not possible to give this advantage in the form that the hon. Member for Bodmin (Mr. Bessell) wants. The object of regional policy is to encourage new industry to go in there, not to ruin the industries which are outside. If we start giving this concession in the manner suggested by the hon. Gentleman, we would not bring new industry to the regions, we would demolish the taxed industry which was left to compete with the exempt industry of the region. Moreover, it would be illegal under our international obligations, because we would give the regions a tax advantage against imported goods.
For those reasons I hope that with his customary moderation the hon. Gentleman will feel inclined to reserve his position by withdrawing the Amendment.

Mr. Bessell: Right through the Financial Secretary's argument I was not prepared to waiver for a second, and I hoped that his coat tail would be pulled by the Chancellor so that he might change his mind and give a totally different answer. Alas, that did not happen.
But there is one point on which I readily admit the hon. Gentleman has floored me, and that is the position of this country in relation to G.A.T.T., and of course it is G.A.T.T. which might be

affected. If the hon. Gentleman is correct in that assumption and I believe him to be, then obviously my Amendment must be withdrawn, but I am sure that both he and I will make doubly certain that he is correct before we get to Report.
Holding that one reserve in hand, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Mr. Richard Sharples: I beg to move Amendment No. 48, in page 75, line 16, leave out from beginning to end of line 20.

The Deputy Chairman (Mr. Harry Gourlay): With this Amendment we can take the following Amendments:
Amendment No. 71, in page 75, line 19, leave out 'poultry or game' and insert:
'poultry, game or wild birds'.
Amendment No. 127, in line 20, at end add:
'unless such foods are canned, packaged or prepared in a development area as designated by the Board of Trade'.
Amendment No. 128, in line 20, at end add:
'unless such foods are canned, packaged or prepared in Scotland'.
Amendment No. 129, in line 20, at end add:
'unless such foods are canned, packaged or prepared in Wales'.
Amendment No. 130, in line 20, at end add:
'unless such foods are canned, packaged or prepared in Devon or Cornwall'.
Amendment No. 72, in line 20, at end insert:
Nothing in the foregoing shall apply to food for guide dogs for the blind, for which special tax-free supplies shall be arranged.
Amendment No. 73, in line 20, at end insert:
Nothing in the foregoing shall apply to food for cats or dogs owned by old age pensioners for which special tax-free supplies shall be arranged.

Mr. Sharples: The Chancellor of the Exchequer, whom I am glad to see in his place, said in his Budget speech:
I also propose to bring prepared pet foods—widely advertised, no doubt appreciated, but not an essential means of feeding a pet—into tax at the same rate."—[OFFICIAL REPORT, 15th April 1969; Vol. 781, c. 1024.]
The majority of hon. Members who were present in the House at that time gained the impression that those tax proposals


were intended to hit out at those pet foods which are widely advertised on television, and that it was the Chancellor's intention not to go further than that.
Now that we have had an opportunity of studying the Schedule we see that this was not the only occasion on which the Chancellor did not take the House fully into his confidence—to put it politely—as to the proposals he was making in his speech. If we look at the words in the Schedule we see that they go considerably further than that. Not many members of the public outside have yet realised that what the Chancellor's proposals meant was a tax of £4 10s. on every domestically-owned cat and an increase in the tax on dogs, of every kind, of approximately £9. If my figures are incorrect I hope that the Minister will tell me what the correct figures are—because these are the best that I can obtain.
The Committee should also realise the number of households involved, and the extent of this new tax which the Chancellor has slipped quite cheerfully into his Budget speech. Nearly 9 million households will be affected. A high proportion of those are the households of retirement pensioners and those on lower income scales. Of those 9 million households—and again these are the best figures that I have been able to obtain—30 per cent. are those of retirement pensioners, who will have to bear this additional tax and 36 per cent. have incomes which fall into the lower brackets—what the pollsters classify as the D and E categories. A high proportion of those 9 million households have young children, who are also having to bear additional costs.
I should like to quote from a letter that I have received from the Royal Society for the Prevention of Cruelty to Animals. The Secretary of the Society says:
At the last meeting of the Society's Council considerable concern was expressed at the proposal to introduce a tax of 22 per cent. on pet foods. It was felt that this would undoubtedly cause great hardship particularly to owners of animals living on a small fixed income and could well result in their pets being denied sufficient food particularly because their owners could not afford the additional costs involved.
The Chancellor implied in his speech that the foods that he was proposing to

tax were not essential for these animals. I hope he has had an opportunity of reconsidering this position, because of course it is quite impossible for any person living in one of the larger cities to be able to keep a cat or a dog as a pet without using prepared foods of one kind or another which now fall within Schedule 6 of the Finance Bill. If there are other methods which the Chancellor has in mind, perhaps the hon. Gentleman who is to reply to the debate will tell the Committee what they are.
12.15 a.m.
Of course the tax falls not only upon the animals which are classified as pets. It falls upon working dogs as well. It falls on dogs which are employed in agriculture, and the Financial Secretary will know that a very large proportion of the dogs employed in agriculture are employed on the smaller farms, the hill farms and others, which are going through a most difficult stage at the present time. I hope that the hon. Gentleman will say what is the estimated additional cost to agriculture of this proposed tax.
The tax also falls on dogs employed as security patrols, but most of all perhaps—and I think the Committee will want to give serious consideration to this—it falls upon the kind of dogs employed as guide dogs to the blind. Perhaps the constituents of the hon. Gentleman the Member for Bilston (Mr. Robert Edwards), who is laughing, might like to know that he finds this extremely funny.
If I may quote from a letter dated 19th May sent to me by the general manager of The Guide Dogs for the Blind Association, he says
Unfortunately, of necessity, the guide dog is generally a large animal, either an Alsatian or Labrador or other breed of equivalent size, and consequently they are expensive to feed. Furthermore, the blind community tend to fall into the lowest income brackets. Those who are employable do not normally command high wages, and a very large proportion are unemployed and live on national assistance.
He later goes on
After making some allowances for the use of fresh meat in feeding their dogs, I calculate that Purchase Tax will cost a guide dog owner an additional £10 per annum on his feeding bill.
I understand that representations were made by The Guide Dogs for the Blind


Association to the Chancellor of the Exchequer, and that they received the usual reply.
The Chancellor's secretary, in a letter dated 8th May, said
it is recognised that this tax is bound to have an effect on the cost to a blind person of keeping a guide dog, because in the nature of things he or she is likely to be buying the more convenient canned and packaged foods which fall within the scope of the tax.
The letter ends
Much therefore as the Chancellor sympathises with your request for relief from tax on food for guide dogs for the blind he regrets that he is unable to help.
Whatever other reply may be made to this Amendment, I hope that the Chancellor of the Exchequer will give further thought to this request from The Guide Dogs for the Blind Association. I believe that in this instance, whatever else may be thought about this tax, it will result in real hardship which I do not believe the Chancellor could have considered when he introduced the tax in his Budget speech.—[Interruption.] If the hon. Gentleman wants to interrupt, perhaps he would do so from a standing position.
The R.S.P.C.A. believes, as I do, that this tax will lead to an increase in the practice of abandoning animals. There have been Press reports of animals being abandoned on motorways, and I am certain that, if the Chancellor wanted to raise additional revenue from dog owners, he should have accepted the R.S.P.C.A. proposal that the right method was to raise the dog tax and not the cost of keeping the animals.
This tax was not thought out. The public do not realise its extent, and the cost which will fall on many families. I ask the right hon. Gentleman at least to consider what I have said.

Mr. Peter Hordern: I support the Amendment which my hon. Friend the Member for Sutton and Cheam (Mr. Sharples) moved so eloquently. This new tax will hit the lonely, the old and the poor. It will not mean a considerable increase in revenue. The Chancellor said that purchase tax on potato crisps, salted and roasted nuts and pet foods will together bring in £22 million. What will be the extra revenue from this proposal? But it will have a great impact on the old-age pen-

sioner. It is estimated that the resultant extra cost of keeping a pet will be £9 a year. The increase in the pension, about which we have heard so much, at the end of this year, will be £26, so over a third will be consumed by this tax. This will have no small effect on the annual budgeting of the old-age pensioner.
I wish that the Chancellor had given more thought to this and other matters, instead of making some rather cheap remarks about the advertising profession. He said:
I also propose to bring prepared pet foods—widely advertised, no doubt appreciated, but not an essential means of feeding a pet …"—[OFFICIAL REPORT, 15th April, 1969; Vol. 781, c. 1024.]
This is arguable.
I am informed that this proposal is likely to mean that the cost of food generally will rise. Horse meat is used in the preparation of dog foods, and it may not be possible to do so to the same extent, so there will be a small but noticeable increase in the cost of living. It is difficult to know to which field the Government can stray next to raise revenue.
During their period in office the Labour Party have seen the revenue of the Exchequer increase from £7,455 million to over £15,000 million this year. Now they have put a tax on pets. Although the Chancellor did not dare increase the dog licence, he achieved virtually the same end by this imposition on dog food. What will he turn to next? I wonder if next year he will tax children's pets such as white mice and tortoises.

Mr. John Farr: In supporting the comments of my hon. Friends, I cannot help wondering if, in the mechanics of the Treasury, the Chancellor's intentions were understood, for the right hon. Gentleman clearly said in his Budget speech:
I also propose to bring prepared pet foods—widely advertised, no doubt appreciated, but not an essential means of feeding a pet—into tax at the same rate."—[OFFICIAL REPORT, 15th April, 1969; Vol. 781, c. 1024.]
Dog biscuits are an essential means of feeding a dog, but they are not widely advertised. My hon. Friends and I think we know to what the Chancellor was referring. Did not he have in mind those dog foods which are advertised on television with the frequency with which


cigarettes were advertised before cigarette advertising was banned from TV? We never see dog biscuits being advertised on TV.

Mr. Albert Murray: Yes, we do.

Mr. Farr: It is possible, though difficult nowadays, for people to obtain scraps of meat from the local butcher for use as dog food, but there is no substitute for the biscuit in a dog's diet, a fact which has for long been appreciated.

Mr. Murray: A brand of dog biscuit called "Crunchy Mick" is advertised widely on TV. In any event, I do not think that my right hon. Friend was referring only to TV advertising. All dog biscuits are advertised by one means or another.

Mr. Farr: That intervention shows that we are not sure what the Chancellor meant. As he is in his place, will he make the position clear? His reference in his Budget speech seemed clear when he spoke of inessential means of feeding pets. Are not dog biscuits an essential part of a dog's diet? Should people use bread crusts instead?
In addition to Amendment No. 44 we are discussing Amendments Nos. 71, 72 and 73 and I will deal briefly with each. I hope that, at this late stage, the Financial Secretary will sweeten the bitter Budget pill by making a small concession, if not to the aged then at least to the blind, by exempting guide dogs for the blind.
Amendment No. 71 seeks to exempt packaged food for wild birds in the same way as there is an exemption in the Bill for poultry and game. The cost of collecting the tax on wild bird food would be out of proportion to the yield, which would be infinitesimal. On the other hand, old people and children get a good deal of pleasure in hard weather out of sprinkling these prepared package foods on the lawn or the streets.
12.30 a.m.
Amendment No. 72 seeks to deal with a difficulty referred to by my hon. Friend the Member for Sutton and Cheam (Mr. Sharples). Guide dogs are essential to many blind people, and these people will be faced by an extra cost in feeding their

animals. These dogs cannot really be called pets: they are as essential to their owners as are eyes to other people. The bill for meat and biscuits will rise substantially. I estimate that the present cost in London or any big city to be about 10s. or 15s. a week, and the tax will add 2s. to that bill.
There is no substitute for a guide dog. A blind person would be just as helpless if the right hon. Gentleman were to treble this tax—the dog must still be fed, whatever may be the cost of its food. The blind are in the hands of the Committee in that respect. The Amendment provides the Chancellor of the Exchequer with an admirable opportunity to flavour some of the rather resonant "Noes" we have had from him during the last four days of discussion with something a little more palatable.
The other Amendment relates to the slightly wider range of people who, in old age, find a cat or a dog a great companion. Their children may have married and left the family home. These old people will still be able to have the companionship of their cat or dog if they can afford the extra cost of the food. If they cannot afford it, they will have to do away with their pet or may be tempted to spend no more money on the animal's food and so provide insufficient food. Either of the last two solutions would be unsatisfactory.
I ask the Financial Secretary, who is straining at the leash—

Mr. Arthur Lewis: Instead of paying about 10s. or 15s. a week, people would find it easier and cheaper to buy continental fresh meat at about 2s. a pound. They would save money, and the pet would be just as well off on continental food.

Mr. Farr: I agree that it is still possible to get fresh meat scraps from the butcher, but that will become more and more difficult because butchers do not want to be bothered with such business. In any case, biscuits are an essential part of the diet, and there is no substitute for them.
I am very glad to see the Financial Secretary straining at the leash to make this small concession, which will cost him nothing but will mean so much to quite a number of people.

Mr. Robert Cooke: This tax will mean that very much loved family pets will now cost more to maintain on their favourite tinned food. The Chancellor has suggested, at any rate by inference, that good plain food is still exempt and that pets will be able to continue to enjoy that. If the Chancellor is right, he will get no revenue from the tax, because all expensive dog foods will go by the way. That would seem to defeat part of his argument. Then the Chancellor will probably say that the Inland Revenue has just announced that the cost of keeping watchdogs can be a charge against tax. That concession will apply only to those who pay tax against which the charge can be set. Most of those whom we seek to help by these Amendments do not have taxable income. So that is another argument against us that I have disposed of.
In any case, the whole thing is full of anomalies. The Amendments draw attention to these anomalies. Even if the Bill is left as it is, certain fish foods will escape, although all pet foods were meant to come within the thrall of the Schedule. Ant eggs are not covered. They are not prepared. They are merely collected and are often sold loose. Bird seed sold loose, in whatever amount, would seem to be outside the scope of the Schedule. I hope that what I say will not induce the Chancellor to include it at a later stage. Perhaps most of it is sold in packets. Why tax packeted bird seed? It will only drive people to buy it loose, thus destroying the trade in packeted bird seed. It will be more troublesome for purchasers to go along with their own paper bag, but it will be possible to get round this. The whole thing is a futile exercise which will cause everybody a good deal of trouble.
Then there is the point about exemption for pensioners. This is a laudable proposal. However, the Chancellor will argue that if the concession were granted it would be possible for pensioners to run an enormous boarding kennel at an unfair advantage compared with non-pensioners. I can visualise these arguments being dreamed up by the Treasury to ensure that the Minister puts up a good defence of the indefensible. In view of all the anomalies and difficulties, we must support the Amendment which would take the whole thing out.
I come, lastly, to the vexed question of guide dogs for the blind. A point which has not been made is the considerable difficulty that a blind person has in preparing for his dog a meal consisting of raw food. It is virtually impossible for a blind person to know exactly what he is preparing and to get it right. It is easy for a blind person to open a tin. The blind depend on a tin of a certain shape and size. It can be recognised easily by a blind person and opened easily. A blind person cannot feed his dog unless he does so from a tin. Tinned dog food will now cost more.
The last argument that I suspect the Chancellor will advance is that he cannot do without the revenue. Why does he not go for what has already been suggested—a low-level sales tax which would cover many things? Small purchasers would be exempt from such a tax. Those whom we want to help—the unfortunate, old-age pensioners, and the blind—would all be exempt, because they would be making small purchases.
I think I have made a case in support of the Amendment and have filled in any gaps which my hon. Friend may have left. I hope that we have persuaded the Financial Secretary, even if he is not authorised by his boss to yield to our pleas this evening, at least to say that he will reconsider the matter.

Mr. Harold Lever: I do not know whether the last invitation was for me to strain at the leash or strain at my job. I must disappoint hon. Members who have spoken. It is not from lack of sympathy, because a concession for guide dogs for the blind in particular would involve a negligible cost if it were practicable to arrange concessions in relation not to the articles but to the kind of people using them and deserving of our compassion. I have explained on innumerable Amendments that this is not a possibility and could not be attempted.
It is true that pets can for the most part be fed quite readily in other ways than on tinned foods. I cannot accept that this is no longer practicable. Indeed, the inevitability of feeding pets on tinned foods seems to bear a direct ratio to the amount of money spent on television advertising. It seems that only seven years or so ago only about half the pet foods were being sold that are sold today. One cannot claim that the habits of diet


of pets have suddenly changed in that time, since they managed on half the amount of tinned food seven years ago.

Mr. Sharples: The hon. Gentleman obviously has not seen the notice put out by the Board of Trade on this. It refers not only to tinned foods but to frozen foods—indeed virtually all foods except butcher's scraps.

Mr. Lever: I was referring to the growth in the sale of prepared pet foods, which has increased at the rate of 10 per cent. per annum compound. I have done some rough arithmetical calculations and have found that approximately double the amount is being consumed compared with seven years ago.
Having been accused earlier of being unsympathetic to the blind and disabled, I hope that I shall be acquitted of having a distaste for dogs, cats and other pets or for the people who keep them and need them or derive pleasure from them. This is a matter of judgment and the Committee is always ready to make wise, speedy judgments at this sort of hour. I do not think that a documented argument is really wanted from me, so I say only one thing to the Committee—that is, keep this in proportion. The total tax to be raised on pet foods is about £10 million. I understand from the hon. Member for Sutton and Cheam (Mr. Sharples) that 9 million households derive encouragement, comfort and assistance from their pets. This tax will therefore cost £1 per year per such household. It comes to about 4½d. a week each.
But I am exaggerating the figure, because the heaviest consumers are among the commercial dog proprietors—the great Securicor fleet of massive Alsatians which guard our empty warehouses and the like. They are the great consumers. I am thus exaggerating slightly in saying that the cost will be 4½d. per pet-keeping family per week. We do not relish putting this burden on them, but I base the argument on broadening the tax base through small amounts of tax rather than on large taxes on certain goods which distort the pattern of consumption.

Mr. Sharples: I cannot pretend to be satisfied with the reply. I do not think that the hon. Gentleman has tried to answer the debate or the arguments, but in order to leave the matter open so that it can be raised again on Report, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Question proposed, That the Schedule be the Sixth Schedule to the Bill.

Mr. Iain Macleod: I do not intend to invite debate, much less a Division, on this Schedule. We have made our position clear. I merely take 30 seconds, particularly with the Chancellor present, to record the end of what I think he will agree has been a most interesting experiment. By bad luck, we lost an hour today in injury time and 45 minutes yesterday. But taking that into account, the four subjects were discussed exactly on schedule without any Closures and with some excellent debating. This experiment was entered upon in our ceaseless search for the best way of accommodating the Finance Bill to the convenience of the Committee and the House, and we should record that, on the whole, it has been something of a success.

12.45 a.m.

The Chancellor of the Exchequer (Mr. Roy Jenkins): I am delighted to follow the right hon. Member for Enfield, West (Mr. Iain Macleod) and say that I, too, think that the four days have been usefully employed. This year we have moved a substantial distance, and I am grateful to the right hon. Gentleman for his co-operation and that of his right hon. and hon. Friends in finding a satisfactory means of dealing with the Finance Bill on the Floor of the House and in Committee upstairs. I think that they have been good debates. No doubt we have not yet achieved perfection, but we have moved a long way towards finding the best solution.

Question put and agreed to.

Schedule agreed to.

Bill(Clauses 7, 8, 36, 38, 43, 44 and Schedule 6) reported, with Amendments; to lie upon the Table.

Orders of the Day — STATUTE LAW (REPEALS) BILLS

So much of the Lords Message [20th May] as communicates the Resolution, That it is desirable that, in the present Session, all Bills prepared by one or both of the Law Commissions to promote the reform of the Statute Law by the repeal, in accordance with Law Commission recommendations, of certain enactments which (except in so far as their effect is preserved) are no longer of practical utility, and by making other provision in connection with the repeal of those enactments, together with any Law Commission report on any such Bill, be referred to the Joint Committee on Consolidation, &c., Bills; and that, on any such Bill, the Joint Committee do report whether the enactments proposed for repeal in the Bill ought to be repealed on the ground that they are no longer of practical utility, and do make such other report as they may think fit, to be considered forthwith.—[Dr. Miller.]

So much of the Lords Message considered accordingly.

Resolved,
That this House doth concur with the Lords in the said Resolution.—[Dr. Miller.]

Message to the Lords to acquaint them therewith.

Motion made, and Question proposed, That this House do now adjourn.—[Dr. Miller.]

Orders of the Day — AGRICULTURE (NORTHERN IRELAND)

12.47 a.m.

Lord Hamilton: The House is only too conversant with the recent problems afflicting Northern Ireland. However, neither the headlines nor the television cameras have focussed attention on the prevailing problems of agriculture, since these problems do not constitute that all-important word "sensationalism", although they are seriously affecting the health and morale of our biggest industry, agriculture.
These problems represent a mixture of geographical disadvantage, ineptitude of Government action and the size of the average farm holding. Again, the lack of will and determination to implement

the Anglo-Eire Free Trade Agreement continue to hit the industry.
The remoteness from our main market, Great Britain, which consumes more than 80 per cent. of our annual £125 million production, represents a farm income disparity of £7 million per annum compared with average prices in this country. This is a most serious and alarming situation as the net income of Northern Ireland agriculture was £26 million in 1966–67.
Every farm commodity, except pig production, suffers from this price disadvantage which, through inflation, continues to expand. For example, returns on fat cattle and sheep are approximately £4 million less and the milk producer receives 4½d. per gallon less than his counterpart in this country, while feeding-stuff costs are at least £2 million per annum more.
The remoteness grant meets only £l¾ million of this disparity, since the disadvantage of remoteness is still costing the industry £5½ million per annum, which represents a loss of income of 20 per cent.
It must be realised that the cost of transporting the processed product across the Irish Sea has to be borne by the Northern Ireland farmers, for, unlike other industries, agriculture is unable to pass on this additional burden through increased prices.
As a result of the debate on the high cost of imported feedingstuffs, initiated by my hon. Friend the Member for Antrim, North (Mr. Henry Clark) on 3rd July, 1968, the Joint Parliamentary Secretary to the Ministry of Agriculture gave an assurance that an examination would be carried out jointly by Whitehall and Stormont into the question of farming costs in Northern Ireland. According to reliable Press reports the result of this examination was an agreed differential of £2 million per annum. The Northern Ireland farmer is now waiting impatiently for the Government to take action to close this yawning gap.
It must be recognised that Northern Ireland is a country of smallholdings and therefore a small farmer is particularly dependent on imported feedingstuffs, as he is forced into intensive production of either pigs or eggs, both of which require high concentration of imported feeding-stuffs.
The result is that he is having to pay at least £1 per pig and 2½d. per dozen eggs more on higher feeding costs. The output of the pig and poultry industries account for almost 42 per cent. of the farming output of Northern Ireland. It must be remembered that these industries were developed during the days of parity in feedingstuff costs with Great Britain. During the past year, production of pigs in Great Britain has increased by between 7 per cent. and 10 per cent., while production in Northern Ireland has remained static. It is vital for the preservation of a healthy agricultural industry that Government action is taken to alleviate this handicap in feed costs. Almost all farm capital investment has to be found out of income. To keep pace with new developments there is a constant need for further capital injection but it is extremely difficult to meet this need owing to the lower profitability of Northern Ireland farms and as a result, capital expenditure is static and shows a downward trend in real terms.
The Government are fully aware of the feelings and reaction throughout Great Britain about this year's Price Review. I can assure the Minister that when an inadequate award is given, with price levels failing to provide incentive and investment, the results are disastrous in Northern Ireland. There is a real threat, and this is no exaggeration that agriculture in Northern Ireland might become a depressed industry. The Government must realise that owing to our remoteness from our main markets, we have to be ahead of the rest of the United Kingdom in efficiency and productivity. This is impossible under present conditions. If our financial returns were on parity with Great Britain we could be investing to the tune of £5,500,000 per annum in stock and capital equipment without loss of personal income.
There is much concern about the future of the egg industry. When the guarantees are phased out by March, 1974, the advent of a free market after March, 1971, will make it more difficult for remote areas to continue in egg production. Northern Ireland transports 90 per cent. of its £17 million per annum production to Great Britain. The result of the Government's intended policy would have serious social and economic consequences. Since egg production is carried on by 55 per cent. of all farm

holdings, the only alternative source of revenue for a small acre specialist is in pig production, which does not present a favourable outlook owing to the lower guaranteed prices and the high capital investment.
The recent Price Review was a bitter disappointment for the Northern Ireland egg industry, which produces a higher quality commodity than in Great Britain. There is widespread suspicion that the Government's intention is for production to fall and for any deficiency to be met from increased levels of imports, which will only aggravate our balance of payments further and hit the small farmer particularly hard.
I welcome the Government's intention to contribute towards the cost of sea transportation across the Irish Sea, but this grant must be both realistic and on a long-term basis; it must represent the full cost of sea transport by all routes used and take into account future cost increases due to inflation. This subsidy should not identify Northern Ireland egg production as the lame duck of the industry, but should be a recognition of our efficiency and quality. If the Government's proposed central authority materialises, I trust that the authority will be run with the minimum of expense, since Northern Ireland egg producers will be contributing towards the cost of the authority. Northern Ireland should have representation on the authority. The Government must realise that the whole future of egg production in Northern Ireland is in the balance.
Ten years ago, egg producers could have left the industry overnight. Today, because of high capital involvement in equipment, housing and stock, it is economically impossible to do so, in spite of the future instability of the market and the fact that margins of profitability have been falling in recent years.
Egg production in large units near cities would increase demands on the scarce resources of labour and space in these areas. This would be in direct contrast to the Government's declared policy of industrial development certificates. There would be an inevitable manure disposal problem. Furthermore, this concentration of egg production into relatively few large units would endanger supplies from the disease risk point of view, and enhance the distinct possibility


of monopoly, which would not be in the interests of the consumer.
The need to maintain and develop further a viable meat export industry in Northern Ireland results from the increasing difficulties in shipping live cattle, the saving in the transport costs of meat as opposed to livestock and the all-important employment aspect. It is estimated that the transportation saving on meat on the hook is £1 16s. 9d. per ten cwt. animal.
The effects of the Anglo-Eire Trade Agreement are undermining and endangering the viability in the whole of the dead meat industry.
In 1968, the Eire meat plants received subsidies on meat exported to Great Britain amounting to £5½ million. The British Government alone paid the Eire Government about £1½ million for 25,000 tons of beef and 5,000 tons of mutton, as agreed in the Agreement. The Eire producer receives a small proportion of this subsidy whilst the dead meat industry receives the major benefit of the payment, which enables the industry to subsidise exports of meat to the British market.
In 1968, the subsidy paid to the Eire plants averaged a little over 3d. per pound, whereas in the same year, the Northern Ireland meat plants received a direct subsidy of about ½d per pound. As a result, the Eire dead meat industry is in the unfair position of manipulating the market price as and when they desire, thus undermining selling prices.
The increase in the guaranteed price of beef in the 1969 Price Review will tend to increase the advantage enjoyed by the Eire meat plants in that the subsidy paid to them has in the past been based on the British deficiency payment.
When Britain devalues, decimalises or abandons Greenwich Mean Time, Eire complies. Now is the time for the Government to ensure that Eire complies in the correct allocation of the subsidy by making sure that the subsidy goes to the producers and not to the dead meat industry.

12.58 a.m.

Mr. Henry Clark: I am obliged to my hon. Friend the Member for Fermanagh and South Tyrone (Lord Hamilton) and endorse his admirable, detailed speech, in which he men-

tioned the handicaps suffered by the Northern Ireland farmer. Every farmer suffers handicaps but I am not being a Jeremiah when I say that the Northern Ireland farmer suffers from more handicaps for more of the time than most other farmers in the United Kingdom.
The figures recently produced by the Government were seasonally adjusted for the disastrous weather suffered last year by the English farmer. I hope that the figures for recent months will be slightly more optimistic and that they will be seasonably adjusted for the remarkably fine weather which we enjoyed in Northern Ireland last year, which made things look better than they would normally be.
My hon. Friend has pointed out that there is a 20 per cent. shortfall between Northern Irish farmers and farmers on this side of the Irish Sea. Farming is a varied industry. It would be incredible if that 20 per cent. were evenly spread throughout the industry. There are, therefore, inevitably many farmers who are 30 and even 50 per cent. worse off than their counterparts, who are equally efficient and work equally hard, on this side of the Irish Sea. Some farmers are suffering real hardship and losing on their operation.
There are a number of alternatives which have been made clear to the Government which they could follow. They could—they have been generous in this in the past and they could do it again—increase the standard quantity of liquid milk in Northern Ireland so that a better price could be paid to the farmers. They could prohibit all egg imports into the United Kingdom. They could retain eggs as a Price Review commodity and see that the price achieved for them was balanced in the Price Review every year even if no guarantee was actually made.
The Government could force the Southern Irish Government to observe not only the letter, but the spirit, of the Anglo-Irish Trade Agreement. They could take steps—and various steps have been outlined at various times—to bring the cost of feedingstuffs in Northern Ireland in line with the cost of feeding-stuffs in other parts of the United Kingdom. Finally, they could, possibly, increase the remoteness grant to a realistic level, although this is the last thing, I think, that the Northern Irish farmer wants.
We in Northern Ireland are quite prepared for a reasonable level of drift from the farm to the factory. We know that in this modern age that is inevitable. The Under-Secretary of State may remember some of the speeches I made in Committee on the Agriculture Bill. He knows something of the structure of Northern Ireland. I will not repeat what I said then. If the rate of drift from farm to factory, or from the farm to unemployment, increased by any considerable amount at this difficult time in Northern Ireland, we would have a steep increase in unemployment and a real degree of hardship and difficulty all through the countryside in Northern Ireland. I hope sincerely that the Under-Secretary has listened to the remarks of my hon. Friend.

1.2 a.m.

The Under-Secretary of State for the Home Department (Mr. Elystan Morgan): The House will be grateful to the noble Lord the Member for Fermanagh and South Tyrone (Lord Hamilton) for initiating what he described as an unsensational debate and drawing our attention to some of the current problems of agriculture in Northern Ireland. I will return presently to the specific points which both the noble Lord and his hon. Friend the Member for Antrim, North (Mr. Henry Clark) have raised.
The Government fully recognise the supreme importance of agriculture to the economy of Northern Ireland. It remains the largest single user of labour despite the energetic efforts which have been, and are being, made to increase employment in the industrial sector. The Government also recognise that agriculture in Northern Ireland faces very real problems.
The basic causes of those problems will be familiar to the noble Lord and his hon. Friend. As he knows better than I, the climate of Northern Ireland is less suitable for cereals or horticultural production and agriculture must, therefore, depend substantially upon livestock. There is also the different pattern of costs.
Furthermore, there exists the problem of farm structure. There are about 40,000 farming units in Northern Ireland. Of these, 18,000 are regarded as being too small to be viable in the sense of yielding a full-time livelihood to the farmer, but about half of those 18,000 provide the

only source of income for their occupiers. Even of those units which can be regarded as viable by that standard, many are still very meagre holdings. Finally, there is the difficulty caused by the remoteness of Northern Ireland from the main markets for agricultural produce.
We must, however, remember that similar conditions face farmers in other parts of the United Kingdom. There is sometimes a tendency to talk as if the problems were peculiar to Northern Ireland, but Great Britain has a considerable number of small farm units and production costs are not the same in every part of the United Kingdom. The wetter and hillier areas of England, Scotland and Wales are limited in the amount of crops they can produce.
As a private Member, I have sought to draw attention on a number of occasions to the different production costs in Wales. Feeding costs in Wales tend to be £3 a ton higher than the average in the United Kingdom, and the cost of milk production about 3d. to 4d. a gallon higher, while the return on any product is also different. The price for fat cattle is about 7s. or 8s. lower than the average for the United Kingdom.
What differentiates Northern Ireland is that the problems are concentrated in a smaller area and this means that a number of the grant schemes designed to help less favoured areas are often of assistance to Northern Ireland. These include the Small Farmer Scheme and its successor, the Small Farms (Business Management) Scheme which is being extended for another year and is now due to run to August, 1970. These have been widely used.
Then there are the grants introduced in the Agriculture Act, 1967, to encourage voluntary farm amalgamations and thus create economically more viable holdings. These should be of special value in view of Northern Ireland's farm structure.
In addition to these general measures, and to the usual United Kingdom guaranteed price and production grant schemes, there is the special support to agriculture in Northern Ireland afforded by the special assistance, or "remoteness" grant. We have been told that this is now running at £1¾ million a year. The purpose of this grant is specifically to offset the disadvantage of Northern


Ireland producers, arising from the remoteness of the main United Kingdom markets over and above the disadvantages of producers in other parts of Great Britain. Most of the money is used to help livestock producers and is spent on schemes to encourage good marketing and good quality production.
I should like to turn to some of the special points raised by the hon. Member for Fermanagh and South Tyrone. First there are farm incomes. It is true that farmers in Northern Ireland have average incomes lower than those in England and Wales, but it is fair to remember that not all the factors which distinguish Northern Ireland agriculture from that of the rest of the United Kingdom are to the disadvantage of Ulster. Furthermore, although the Government can take no credit, we should not forget that last summer's harvest was the best this century for Northern Ireland, and in spite of what the hon. Member for North Antrim said, I would suggest that this is a not unimportant part of the total picture of current agricultural fortunes in Ulster.
The basic problems of farm structure involve factors which cannot be readily redressed. In particular, it must take a considerable time to strengthen the holdings, although considerable progress is being made. But Northern Ireland farmers have at least benefited from the relatively favourable experience of livestock producers compared to arable producers in the last two years. In 1967, as hon. Members will concede, there were substantial increases in average incomes for all main types of farming enterprise in Northern Ireland, and the trend is expected to have continued in 1968. Although average incomes continue to lag behind in Northern Ireland as they do in other remote areas of the United Kingdom, farmers there are now doing as well as those in similar situations in Great Britain. This certainly represents not only an absolute, but also a relative improvement for Northern Ireland, and I think we may take it as an indication that the measures which the Government have taken over the years have borne fruitful results.
The noble Lord has suggested that the Northern Ireland producers are at a dis-

advantage because of the higher costs of feedingstuffs there. This problem has been studied by the Ministry of Agriculture for Northern Ireland with assistance from the United Kingdom Ministry of Agriculture and agreement has been reached on the technical facts. In brief these amount to the acknowledgement that there is a disparity between the costs of feedingstuffs in Great Britain and in Northern Ireland assessed at £½ million in 1962–63, then increasing to about f2½ million in 1967–68. Recently, however, the gap appears to have narrowed. The action, if any, which should be taken to offset this disparity is still under consideration.
Another point which the noble Lord raised was the question of the Anglo-Irish Trade Agreement.

Mr. Henry Clark: rose—

Mr. Morgan: I am in competition with the clock, and I am sure the hon. Gentleman will understand if I do not give way. There is a great deal to be said about the Anglo-Irish Trade Agreement, but I confine myself to the comment that when this was discussed in this House in 1964–65 the Conservative Party did not see fit to object to that agreement as a whole, and many of the conditions which have been mentioned—

Mr. R. Chichester-Clark: At the time we presented strong objections, or rather warnings, on the subject of agriculture, and virtually forecast exactly what has happened.

Mr. Morgan: There were some rumblings of discontent. I was not a Member then, but I am not aware of a Motion of censure having been moved with regard to that important matter.
The noble Lord mentioned the difficulties which meat plants in Northern Ireland are experiencing, and he referred particularly to the effects on their competitive position of the subsidy paid by the Government of the Republic of Ireland on exports of carcase beef. The concern which has been expressed in Northern Ireland about the effect of the subsidy is well understood both by this Government and the Government of Northern Ireland. My right hon. Friend the Minister of Agriculture has been discussing with his opposite number in the


Republic the whole question of the balance and the phasing of the trade in cattle and beef, with particular reference to the effects of this subsidy. The Ministry of Agriculture in Northern Ireland has been associated with these talks throughout, and I assure hon. Gentlemen opposite that the particular problems which arise there have been kept firmly in mind. Active consideration of this problem is still continuing. I am afraid, however, that for that reason I cannot expand on this statement tonight.
I should like also to say a word about eggs, referred to by the noble Lord. This commodity represents a particularly significant proportion of the total farm output of Northern Ireland—15 per cent. as against 8 per cent. in Great Britain as a whole. It is noteworthy that the Reorganisation Commission for Eggs was impressed by the efficiency of Northern Ireland producers and by the high quality of their products. My right hon. Friend the Minister of Agriculture informed the House on 22nd January that the Government accepted the Reorganisation Commission's recommendation that it would be right to move to a free marketing system. The Government have accepted that there is a special problem for egg producers in Northern Ireland in the context of the transition to such a system.
As my right hon. Friend announced, the Government are discussing with the Northern Ireland authorities the provision of special assistance towards sea transport costs for Northern Ireland producers. This is not, however, a problem that will present itself until 1971, since the Egg Marketing Board has been asked to continue until then with the present arrangements, which include equalisation of transport costs.
I should like also to say a word on the awards on livestock at the last two Annual Reviews which have been beneficial to Northern Ireland, relying as she does on her large grassland areas and her traditional skill in producing bacon pigs.
For beef, the guaranteed price has been increased by 26s. per live hundredweight over these two years, the hill cow subsidy has been increased by £3 per head,

and the beef cow subsidy by £2 10s. per head. The maximum acreages on which these subsidies can be paid have been increased by 25 per cent. this year. We are confident, therefore, that the expansion in the beef herd, which has already been taking place at a higher rate than in the United Kingdom as a whole, will continue.
For pigs, at the last two Reviews we have aimed at a steady expansion towards the large numbers we need. But we have sought to avoid speculative increases which can readily lead to market instability. In two years we have raised the basic guarantee by 1s. 6d. per score; but our main strategy has been to give confidence to the regular and efficient producer that he can expand without running into heavy cuts in his effective return under the flexible guarantee system. We have done this by raising the ceiling of the middle band by 700,000 forecast certifications to 14½3 million pigs. This obviously favours the committed producers such as those in Northern Ireland, as opposed to the "in-and-outers". It is reflected in the latest Northern Ireland census figures for March, 1969, which show nearly a 5 per cent. increase in the total breeding herd compared with the revised figures for March, 1968, and also an increase of about 30 per cent. in the number of gilts in pig.
I am not denying that there are real problems in Northern Ireland. Nor do I belittle them. But I hope that I have said enough to show that the Government recognise their existence. It does not, however, necessarily follow that the solution to the agricultural problems of Northern Ireland lies simply in the provision of extra financial assistance. Quite apart from the urgent need to restrict public expenditure, it may not be economic sense to look simply at the symptoms of disparity of development. We must also look at the deeper causes and seek to promote the correct changes and adaptations over the course of time.
This may seem to be a gradual and lengthy process, but I believe that the general trend in Northern Ireland agriculture shows that we are moving towards the attainment of our goals. I have, nevertheless, listened with great interest to the noble Lord's views and I will certainly see that they are borne


in mind. While there may be particular problems affecting agriculture in Ulster—

The Question having been proposed after Ten o'clock on Wednesday evening

and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

House adjourned at seventeen minutes past One o'clock.